Be careful where you invest your money.

Not all investments are good investments. What you thought was a great idea could quickly turn into a financial disaster. This usually happens when people need money the most. They start to make reckless decisions, out of panic, instead of focusing on creating passive income for themselves.

With a little research and an informed approach, you can reap the financial benefits of smart investing.

Here are two different investment possibilities to consider before making your next money move.

Buying Property

Real estate investing can be very a very lucrative investment. A fixer-upper may seem like a great idea. And if you’ve watched enough HGTV you may be considering taking a chance and finding your first rehab property. Properties that need work can be a great investment.

You buy low, rehab the property, and then sell it for profit.

While this sounds amazing you have to be careful not to buy a property that is more trouble than it’s worth. If you’re new to property flipping, you’ll want to look for properties with more cosmetic issues. Get familiar with the process of rehabbing a home. Find quality contractors and then gradually work your way into more problematic properties – that make you a larger return.

But how do you know which homes have the serious issues that really need to be avoided in the beginning? That’s where a quality home inspector comes in. They will be able to find and notate any serious issues before you purchase the property. Develop a relationship with a good inspector, one that you trust to not overlook potential issues – this step alone will save you tons of future headaches when purchasing investment property. 

Buying Stocks

You may be considering investing in the stock market to create passive income for yourself. When it comes to the purchasing stock, knowledge is everything. You want to be sure that you fully understand the process, any penalties, and potential returns before investing any money – or you’ll only want to invest money that you can afford to lose.

Decide which companies you’re interested in investing in, then do your research. Because the market fluctuates, you’re not looking for stocks that are always growing. You want to see the company’s long-term performance and future expansion plans.

I’ve found that one of the best places to begin to explore the stock market is to pay close attention to your 401k plan allocations. Read about which investments are considered high risk and low risk – then look at their performance trend. While your retirement fund is far different than buying individual company stocks, you’ll learn industry terminology and have a better understanding of stock market trends (short-term and long-term).

Tip: When you’re first getting started you may want to explore penny stocks. These stocks usually trade for less than $1.00 per share and they’re traded outside the major stock exchanges; so many people stay away from them. But the reward can be great if you choose well and pay attention. Be warned though, penny stocks are a bit more aggressive than traditional investing – think day trading versus 401k fund.

*contributor written post