Interest Rates As Instruments to Offset Risks

According to Robert Kiyosaki of the Rich Dad, Poor Dad fame, the smarter way to live is not to work hard for your money but to let your money work hard for you. In his famous book, he said that people should learn how to invest so that they can earn faster and bigger - as long as they know how to play in the stock market.

Before trying to put all your money in the stock market, it is important to first understand how the financial market works. One important element to understand here are the interest rates. These rates are very important elements that affect how big and how fast your money grows. Investors look at the rates to be able to calculate how much risk they are taking and to be able to maximize their possible profits from the investment

There are ways by which an investor or an aspiring investor can maximize his returns from his investment through interest rates. First, make sure that your investment in capital is high because most of the time, banks offer the best interest rate if that is the case. A high capital asset can be secured by finalizing the maximum amount that will not be touched before investing on interest laden investments. After which, figure out how long you can block your capital; the bigger it is and the longer you can have it blocked, the better the rates you can choose from.

After settling your capital and timeframe, choose where you want to invest your money. Certificate of deposits is a kind of time deposit that matures in around 3 months to 5 years. It usually has the best interest rates with the lowest risks but the down side is this kind of instrument cannot be withdrawn anytime you want. Meanwhile, Treasury bill is a kind of government security that is said to be the most marketable because they are short term and usually matures in a year or less. These can be purchased at a price less than its par value while you get the whole amount of par value once it matures. Meanwhile, if you want to invest in a no-risk instrument, you can put your money on a savings account; however this instrument yields the lowest interest rates.

When you have figured out your capital and which kind of instrument to invest in, choose the financial institution that offers the most competitive rate. Research is the key here; you can start by personally going to banks to canvass the best interest rates or you can go online and compare quotes from there.