by SoniS

Created on: August 20, 2008   Last Updated: August 25, 2008

The volatility of the market and the economic downturn is enough to confuse a person when it comes to investments. The basic approach is to stay informed and patient with falling prices, higher rates of interest and other pitfalls of the market. You need to use the current state of affairs to your advantage and invest wisely. There are various investment vehicles in the market, the main attractions being stocks, bonds, annuities and real estates. We shall briefly discuss the pros and cons of each to figure out which is the most prudent investment and why.

1. Stocks: If you buy shares or stocks, you own a part of the holding company and are affected by its performance.
Pros: Return on Investment (ROI) is high in the long term. Also, the dividends paid by most can prove to be useful if the stock prices go down.
Cons: The return is not guaranteed as prices can fall and rise radically. So risk involved is very high.
2. Bonds: These are sold by companies or the government when they need money. In exchange of using your money, the company or government will pay you interest on a regular basis and the full amount on maturity.
Pros: The value of a bond does not vary much, so in most cases they offer a steady inflow of cash. Hence, risk is at a minimum.
Cons: They provide a much less ROI on an annual basis. Bond prices vary with the rise and fall of interest rates. Especially with long term bonds, there is the problem of their prices falling when interest rate goes up.
3. Annuities: These are part of most retirement plans as they are like pensions you buy for yourself. This ensures you have a regular income for a definite amount of time or in some case, as long as you live. You can pay in installments or at one go, depending on your financial situation.
Pros: Not much risk involved because of "Principal Protection". You will never get back lower than you initially invested.
Cons: ROI is fixed and very low compared to other investments where there is an opportunity for higher returns.
4. Real Estate:
Having your own home on a piece of land you own is a desire shared by many. But, apart from these ownership dreams, real estate is also an investment tool, which, if used wisely can make you a lot of money. Rental houses, apartments, vacant land, commercial buildings, industrial buildings, shopping centers or warehouses are all considered part of the real estate game.
But while investing in real-estate, an important thing to be kept in mind is location. Location can make or break your

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