If you are thinking of ways to let your money grow, then the safest haven (for those extra cash) is to invest it. Investment is the key towards a stable future and even a better life ahead. The dilemma however faced by most people is choosing what kind of investment. It is a given fact that a lot of people are not familiar with these investment options. To give you a glimpse of what investing is all about, three of these kinds are outlined below which you can easily choose from as these are the popular and easy ones. These will all come in handy if you put in a lot of time and effort to know its’ nitty gritty.
A quick clarification, these are investments that earn PASSIVE income. This means that businesses like MLM, direct selling, sari-sari store, and yes, even franchising are out of the list and depreciating “investments” are also not included. Looking at you, car “investment”.
By definition, real estate is basically a kind of business that engages in the buying, selling or renting out property or properties for that matter. These properties are usually a piece of land with buildings or other permanent structures attached on it or may consist of a land with different natural resources such as water, crops or even minerals present which are by nature immovable. How do you make money with these things? (You may ask). Well, for those who are into this business for many years, it may come very easy but for interested newbie, there are concepts that you should know. The first one is the concept of appreciation referred to as an increase in any type of asset such as your property or land. Thus to answer the question on how to make money, there are three guaranteed ways:
First is that one can earn money from an increase in the property value. The best time to buy properties is when the rate of inflation is projected to exceed the current rate of long-term debt. By the time inflation increases and you plan to sell it, the property value is up and you get to earn even more. The passive income here is not realized at first, but will show up once the land has appreciated in value.
Second is by generating income from rent collected. This is by means of leasing out the property to tenants such as house for rent, offices for rent in buildings, apartments and land for lease. This is the most uncomplicated kind of business that even entails less stress to the investor. You just collect rent, follow up on contracts and that’s it.
Third is by making additional income from existing real estate business operations. This means offering special services to your tenants such as parking fees, vending machines, canteen operations and others. If you think about it, engaging in real estate gives you the thought that making money can be endless if you just have a piece of land.
The other term for this is an open-end investment company. Basically, mutual fund is a type of investment that pools money from a lot of people and uses this money for multiple investment in either stocks, bonds, short-term money market instruments or other kinds of securities called portfolios. This mutual fund is managed by a fund manager or a professional investment manager.
If you become a mutual fund investor, you are referred to as a shareholder. Thus, when there are gains, dividends are also earned. If there are losses, there is a decrease in value of your shares. The best feature of this type of investment is that someone else manages your own money taking away worries in understanding a complicated market. So, you just need to buy them and forget about it for awhile and after some time, if market is good, you will just be surprised with its earnings as compared to just saving it in a bank with minimal interest overtime. Remember that fund managers income is also base on the performance of the fund; hence you will be assured that they will also do well in this aspect. That is why this is their full time job. They want you to earn more.
Stocks and Bonds
These are common terms that one usually encounters even back in high school. But the general notion is still vague to a lot of people. To put this simply, these terminologies need to be defined in a much detailed way.
Let us discuss Stocks first. Stocks or Shares are issued by companies and are for sale to the public as the company wants to bring in partners into their business. This means that ones you buy a stock or a number of shares, you become part owner of the company. You own a portion of the company’s equity. Bonds on the other hand are also issued by a company but on the perspective of debt rather than equity. This means that when a company issues bond certificates, you become part lender of the company. So the company owes you money in simple terms. Now, you may ask, how do I earn in these transactions. Well, a lot of ways, for stocks, you can earn dividends or if the stocks are sold at a higher price, you get to earn also.
For bonds, they pay you interest in the money that you lend them over time. Other companies pay interest twice a year to holders of their bond certificates. To summarize, both stocks and bonds are considered security, are traded and both has a price value. It is also interesting to take note that one needs to be 18 years old to have an account in order to legally make all these transactions.
Stop Spending, Start Investing!
You can start the last two with just P5,000.00 on hand! No excuse to start creating passive income so you have something to enjoy once your body refuses to work for a 9-5 job.