How to get your money to start working for you today
Have you ever thought of how life would be if you did not have to worry about how you can make and multiply your money? In the same way, you do not have to study medicine to be healthy, or you do not have to read the entire bible for spiritual nourishment all the time, in matters of investments you can also take advantage of the available investment options in the market and relax as your money works for you.
According to Manoj Arora: “Money has the power to buy you things. But a much bigger power of money is in generating more money for you. Those who are able to manifest the latter, are never short of it.”
Understanding what these options are and making the right choices makes a whole difference. While making investments it is good to understand the expected returns from each type of investment.
Below is a summary of different asset classes:
1. Equities
Here the aim is to buy stocks that shall appreciate in value and make long-term capital gains or buy stocks with a good history of paying dividends or whose dividend potential is high. The investor should be willing to be in the investment for at least three to five years as the returns can be pretty volatile. One should ensure they select the companies that have good fundamentals and long-term potential. Not good for money meant for fixed expenses like school fees or rent.
2. Fixed Income Investments
As the name suggests the returns are known upfront and the certainty that one gets the returns are generally not very high. One can easily liquidate their investments and their capital is protected. One should however be keen to read and understand how each of the terms and conditions of the investments.
3. Real Estate
The purchase of completed buildings for rental income and capital appreciation helps create a stable income that is growing year over year. The main thing here is to ensure that the investment is in the right location that can attract the right tenants.
4. Pooled funds
Diversification is key and the best way to benefit from this is through indirect investments as it helps bring together dierent people under the roof of a professional fund manager. It is good to make the right choice of fund to ensure the risk-return expectations are met e.g one should not be looking for certainty and invest in an equity fund.
5. Direct investments in businesses
One can choose to be a silent partner or investor in some businesses. The risk levels while doing this are high since in most cases this investment is not formal and so people may take advantage of the providers of capital. The key here is to understand what you are investing in drafting the right documents so that you have recourse in case the investments don’t work out due to factors that could have been avoided.
6. Automation of business and business ideas
With technology, one is able to do a job and continue earning from it. One should learn how the current technology can help them earn constantly from their business. Given that there are various investment opportunities, it is important to ensure that we are in a position to create the right portfolio for starters.
The portfolio should be guided by the investment goal of the individuals. You can segregate your portfolio to fit various goals for example cash for short-term goals like school fees should be placed in a relatively liquid asset while money for long-term goals like retirement should be in higher returning long-term assets like shares and real estate.
The other important lesson is that one should never invest in things that they do not understand. People must spend time learning about how the various investments they desire work out. One needs to learn as much as possible before taking any form of investment. Investors must understand the return, risk, and liquidity of any investment.
Investing in that which you do not understand could be disastrous and you would end up losing your money and getting much further from your goal. Time is of the essence and always plays a key role in investment. Therefore, one must start as soon as possible to experience the magic of compounding. The portfolio starts experiencing significant growth depending on how long the investment lingers in the horizon.
Most investors could think that they can make money trading the market but in some situations, the trading may reduce the overall return and hence should reduce trading activity. The more you trade the more you lose in terms of transaction costs and taxation as you realize the gains.
But remember, when you realize capital gains, then you have to pay the capital gains tax that comes with it. Further, just like everything else in life, one must look for the right partner to walk the investment journey with.
Investing is a long-term relationship and therefore knowing who you are going to walk the journey with is of paramount importance. One should never shy away from asking for help as this is one of the sure ways to learn and grow. Having an accountability partner also helps create the discipline of investing and maximizing returns therefore you might want to look for a financial advisor who shall walk with you through the investment journey
