This is a contributed post.
Unfortunately or fortunately for you, the world doesn’t run on love. The hollow pretense of being good to one and all will eventually lead you to being showered with good fortune is simply not true. Although that may be something you want to do for the sake of yourself, in the world of finances you have to be ruthless in your approach. Being well disciplined to not be controlled by whatever tugs at your heartstrings, and using your analytical brain to make smart investments, is how you produce your own fortune. The big bad wolf who is fast and hard in their chase for the almighty dollar isn’t always the victor, and in fact, that stereotype is really just for movies. In the real world, if you’re some cowboy who thinks you’re going to take Wall Street by storm, think up some bizarre crazy scheme and walk out with bagfuls of cash, you’ll be laughed out the room by serious investors. Serious investors are people who are calm, they take things slow, they make sure they meticulously rake the ground before planting a seed. So if slow and steady wins the race to that pot of gold, how can you as a total novice begin your journey to the end of the rainbow?
Welcome to index funds
Every economy has stock market indexes. These indexes are basically a measurement of a section of the overall stock market. They are selected stocks that are priced according to the market value. Stock market indexes are an overall scope of a bunch of different stocks i.e. companies. NASDAQ, Dow Jones, S&P 500, FTSE 100 etc, are all stock market indexes. For example, think of it this way, for the FTSE 100, it measures the overall and individual stock price of the top 100 largest companies in the UK. these companies aren’t all in the same industry, but simply by a measure of their total worth and success, their stocks are bunched together into one stock market index.
An index fund is a type of mutual fund with a portfolio that buys up stocks of a particular market index. They are fantastic for first-time investors in the stock market for a number of reasons. The cost of owning the stocks is far less than what it would be if you were to go out and buy a stock individually as those selling them would take a commission. Your money is spread out far and wide, up and down the entire index by the fund. This means you have a little bit of everything so if one company or industry goes down in value and another upward, everything balances out. In case there is economic turmoil or some kind of mass crash, your portfolio is incredibly diversified. This means you have much less chance of making a loss and losing your money invested in those stocks. The index fund merely offers you the stocks, invests the money for you, and you’re kept up-to-date with the performance of your investment.
The other way to flip
If you don’t have the expertise, knowledge of the process of simply the interest in buying and flipping homes then you can still get into the property investment market. It’s important to choose what kind of property you’re willing to invest in, and usually, you have to put yourself in the mind of someone who is on the prowl and looking for a new property. Buying to let homes is the other way an amateur property investor can flip a home without actually doing any flipping. Buy to let schemes are laxer than residential mortgages. You need to earn about a certain threshold but then once you meet that threshold then no further questions are asked about your income. The interests rates will be higher as well as the deposit. However depending on the property, you have chosen to buy, the bank or loan company will be more intrigued to give you the loan as the profit yield will be attractive.
So what do you do if you do have the property and you’re letting it out? A company like Beverley Phillips Real Estate offer property management services. Everything from buying the weekly groceries for the client, doing maintenance and repairs, garden and swimming pool maintenance, general cleaning, and laundry services to name a few, is what they offer. So with this service, you can charge higher prices for the rent and begin to make a profit as well as making payments to the mortgage company. It takes a little planning and willpower, however, it’s easier to buy a property and rent it out than it is to buy a property, completely renovate and redecorate and then sell it off. It’s also an investment that is far more likely to be sustainable than most property investments. Once the mortgage is paid off, you not only own a property that you didn’t work to pay for, but you can continue to rent it out to wealthy clients. You’re getting your foot in the door into the upper echelons of the clientele market.
Baby steps in bonds
Bonds are one of if not the safest financial instrument to invest in for a novice looking to make some extra money. Usually, these securities will be in something stable such as pensions, central banks, insurance companies and hedge funds to name a few. You are giving your money to an institution that offers a bond in one of these markets, and in return, you are making a profit from the interest on the bond. This is called the yield, and the curve of this yield fluctuating all the time as the economy changes. Government policy also has an impact on some bonds especially those personally issued by the government itself.
All bonds have to be rated by a credit rating agency such as Standard & Poor’s. The bond price can become turbulent if the rating of the issuer is in peril or the reputation of its dealings lately has been less than desirable. Fixed rate bonds are something you may want to avoid if you’re not a wealthy person. This is because once you have bought the bond at a certain interest rate, although you are guaranteed to remain at that interest rate for the agreed amount of time, you can’t use that money just yet. If you need the money you invested quickly say for example an emergency, you cannot leave the bond and take your money with you. Wealthy investors have no cause for concern as they have plenty of other capital. However, if you’re just the average person, you should be sure that you will not need the money you gave the issuer for the amount of time you bought the bond for. This could be something as little as 1 year or up to 5 or 10 years. It’s far better to buy a flexible bond, which means you still get your fixed interest rate but you can access some of the money you earn as and when you wish.
Investing your money isn’t going to go well if you want to get rich quick. Investment is about patience and long-term planning. Take your time and choose the best index fund for you to invest in. study the market index the fund offers and pick which one you would like to invest in before signing with the fund. Invest in a property with a buy to let mortgage, to start offering your property to those looking to rent. If done correctly you can attract wealthy clients that will pay a high monthly rent. Bonds are called securities because they’re almost always safe and stable. However, if you want something less strict, stay away from fixed-rate bonds.