INVESTMENT: A Road to Build
Wealth
Whether we like it or
not the truth is we can never be rich, or at least build wealth, when we depend
solely on employment. Time has proven
it. Only those who engage in investments ought to achieve what they need and
want in life. Thus, this is now the right time to venture into the world of
investments! But how and where?
It is always
difficult to decide to invest because what we have is hard earned money and there
are a lot of scams out there that promised real good interest but it is too
good to be true. Beware! Make sure that
we get into legal investments that would give us high returns. Investments that would give us passive
income—that is we earn while we sleep! In
other words, let your money work for you.
Here are the lists of instruments where you can safely invest your
money:
Stock
Market
For companies and shareholders stock
market has been a significant and interesting source of income especially when
they want to expand their business. People view stock investments as a good and
fitting only for the rich who have a large sum of money. This might be coupled with the understanding
that to be a shareholder is to be a millionaire. This is a wrong notion because
with only 5000php one can already start investing in stocks. With the advent of technology, we don’t need
to go to PSE to trade. All we need is a computer and an internet connection. So
we can do stock investing anywhere where there’s internet.
Stock market investment is based on
the principle of buy and sell. Because
companies need capitals in expanding their business, they end up selling shares
to the people. So when you buy shares of
a certain company you become a shareholder of that company. If the company
gains, you also gain based on your number of your shares. If it losses, you
also do the same. The great Warren
Buffett provided us the stock market investment rules: 1. Don’t lose
money. 2. Always remember rule 1.
Stocks are considered volatile and prices
fluctuate most of the time. Risk is
regarded as high in this investment. But
risk can be reduced if you follow simple principle in stock investing, that
is: Only buy giant companies with tract
records of good earnings. Make sure
these companies would last 50 to a hundred years from now. Then don’t panic when prices go down but be
happy instead for you can buy more stocks at a low price. “Be greedy when others are fearful and be
fearful when others are greedy” (Warren Buffett). Sell only if the price value of your stock is
high. In other words, buy at a buy-below price and sell at a target price! In this way, you are sure that your
investment is at a maximized growth potential.
Mutual
Fund
There are investors who
don’t want to put their hands on their investments but instead they want
somebody to do it for them. So
basically, mutual fund is a collection of funds from different investors that
are being invested in various avenues like stocks, bond, money markets, or
other mutual funds. The fund is managed
by somebody, a fund manager.
The risk is low for this kind of
investments because your money is diversified and most importantly it is being
cared by a professional fund manager. But
when there is low risk, your money’s growth is also low. And besides, you also pay for your fund
manager for his job. Unlike in stock market, you manage your own investment and
your money’s growth is limitless depending on your strategy. It is good
especially if you have a mentor or a club
that guides you step by step all the way to learning how to buy and sell stocks
by yourself.
Money
Market Fund
Another cash investment tool
is money market fund. It is a kind of
mutual fund but the funds are invested in short term instruments and matures at
a maximum period of 13 months. The risk of investment is reduced by keeping a
short time-frame. In a money market fund,
the average maturity of all investments must be less than 90 days. Remember that the longer you loan money to
someone the higher is the chance that something will happen and that he won’t
be able to pay back.
If people buy and sell stocks in the
stock market, then people buy and sell money in the money markets. Buying or selling money simply means loan or
borrow money, respectively. Because this
is a low-risk investment, the average return is also lower than long term
investment in stocks. In addition,
inflation will eat up your returns over a long period of time. Interested? Banks
offer this type of investments.
Bonds
Lending money to any
borrower is called a bond. It is a loan and you are the lender. The borrower
could be a company, state, or a local municipality. These entities need money to operate. In
exchange for money, the borrower issues a debt security to the lender. The borrowed money will be returned with
interest.
Real
Estate
If you are buying
properties and letting them generate income for you, then you are on direct real
estate investment. Rather than living in
these properties you bought, you think of making money instead. You gain income
from renting or by selling at a higher price as the properties appreciate as
time goes by.
For
instance, you buy a condo and let somebody lives in it for 8,000php a month as a
rental payment. If your condo’s monthly amortization
is about the same price, then that already covers your mortgage payments. And if the value of the condo increases, you
can sell it for a capital gain.
Like
any other investments, there are specific risks and rewards in the real estate
investments. Aside from the maintenance
especially in a house or a condo, real estate market may fall and prices may go
down. A land or lot may not be affected
in this scenario as lot appreciates more than a house. But make
sure that you are prompt to face any challenges in your investment to defy
losing your money.
great blog!
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