Investing in shares

The stock market is quite a popular choice among investors. The annual return on shares is 7% to 8%. Shares can be bought from stock traders. An individual share represents a portion of the company that issued it. By buying a small part of a company (a share), you gain a stake in the success of the company.

Most companies pay their shareholders in the form of dividends. If the company does not pay them out, investors benefit from selling the shares at a higher price than they originally bought them. Investors such as Warren Buffett have shown that even from investing in the stock market, an investor can build up quite a large fortune

A major disadvantage of the stock market is its high volatility and the associated risk. In addition, we all remember all too well the stock market crash that occurred in 2008 and 2009. Few predicted this crash. There was also a big crash at the beginning of the pandemic in 2020

Investing from funds or ETFs

We are familiar with several types of investment funds, but in this article we will focus mainly on mutual funds and index funds.

Mutual funds are made up of a grouping of shares in several companies, which are bundled together in this way into a single investment vehicle.

Index funds are so-called passive investments. These funds are cheaper than mutual funds because they do not need an active manager to supervise them on a daily basis.

Index funds essentially track market indices such as the S&P 500 index or the Dow Jones Industrial Average. Index funds pool financial capital from a number of investors and then use that money to buy the stocks and assets that make up the index the fund tracks.

They are also extremely attractive to passive investors who do not want to pay high fees.

Investing in bonds

At their core, bonds are a type of loan that companies, governments and individuals make to raise the financial capital they need to launch new projects or finance business operations.

Among the positives of bonds is that they do not aim for a large yield and do not chase a large return. Investing in bonds tends to be conservative, low risk and relatively low return. The distinct advantage of bonds is their stability and certainty of return.

At the same time, there is a certain risk associated with bonds, which is that the borrower may in some cases not be able to repay their loan. Different types of bonds carry different types of risk. Another disadvantage of bonds is the relatively low return and the fact that they depend heavily on current interest rates.

Governments of countries such as the United States may provide bonds with lower yields, but also with lower risk of default.

Bonds issued by companies such as Netflix, Apple, Amazon or Facebook are associated with higher risk. Corporate bonds, on the other hand, tend to provide investors with higher yields.

Real estate investment trusts

In many ways similar to mutual and index funds. These trusts offer investors the opportunity to invest in a portfolio made up of investment properties. It is a way to easily diversify your own investment portfolio and own a stake in more investment properties.

For many investors, this is a much more profitable and attractive way to invest than buying a physical property.

The advantage of real estate investment trusts is the fact that you don’t have to worry about real estate at all. This gives you much more time to devote to other things and saves you a lot of stress. Real estate investment trusts are required by law to pay out a fairly high percentage of their earnings in the form of dividends. The value of the dividends paid is usually much higher than that of shares.

For investors who want to invest in the real estate market, but don’t want to take on all the responsibility that comes with owning real estate, real estate investment trusts are the way to go.

Real estate investment trusts are a kind of compromise between investing in shares and investing in real estate. Real estate investment companies offering real estate investment trusts raise capital by selling shares. They then use this financial capital to purchase physical real estate. A share of the company’s profits is paid to investors in the form of dividends.

Purchase of physical real estate

Buying actual physical real estate is also a good way to build your wealth

Most property owners increase the value of their property by buying the property they live in. The value of real estate generally increases with time. However, many people choose to buy real estate to use as a source of steady income. Some investors will even buy an older or vacant property, renovate it, and then sell it at a substantial profit.

Unfortunately, there are also many other specific expenses associated with real estate. For example, property tax, property insurance or even expenses for the maintenance of the property. These additional expenses are the reason why some investors consider the purchase of a building plot on which there is no real estate to be a rather risky move.

Some investors even rent out the property, setting the rent at an amount that will cover all the expenses associated with owning the property. However, if you are more comfortable with buying a run-down property that you will renovate and then sell, make sure you buy it at a good enough price. The sale price should be enough to cover your running costs, renovation costs and selling costs.

Probably the biggest advantage of investing in this asset is the various tax breaks. Another advantage is the relatively low volatility of the real estate market. The real estate market also does not trade as quickly as other markets, which gives investors more room to exit the market in a downturn.

Home insurance protects investors from total loss. Investing in real estate, whether in the form of buying physical property or investing in real estate investment trusts, provides investors with a long-term and relatively stable income.

Some investors see the low liquidity of the property market as a positive, while others see it as a negative. The truth is that transactions do not take place as quickly as in other markets, which may worry many investors. Another major disadvantage of investing in real estate is the relatively high transaction and other costs.

Investing in gold

Gold is the asset that people all over the world turn to in times of uncertainty. It is true that gold has been able to maintain a stable value over many years and because of this, it can be considered a good asset to hedge our investment portfolio against inflation.

If the value of the US dollar, or any other currency, falls, the price of gold will usually rise or stay the same.

Atypical investing

The options we have mentioned above are certainly not the only options for investing, the best option for investing is in something that creates some value. A company produces products, crops grow on land, real estate houses people, web portals generate income through affiliate and cashback collaborations, etc.

So it is always better to invest in things that generate value than those that only have value by virtue of scarcity e.g. cryptocurrencies.