Having your money work for you
Have you ever thought of how life would be if you did not have to worry about how you shall make or multiply your money? How would it feel if you found out that someone else’s job is to ensure that you get very high-risk-adjusted returns?
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 that will help you relax as your money works for you as per Manoj Arora’s saying “Money has the power to buy your 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 brief summary of the returns from the different asset classes:
- 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.
- Fixed Income Investments: As the name suggests the returns are known upfront and for 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.
- 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.
- Pooled funds: Diversification is key and the best way to benefit from this is through indirect investments as it helps bring together different 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.
- 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.
- Automation of business and business ideas: with technology one is able to do a job one and continue earning from it. One should learn how the current technology can help them earn earn constantly from their business