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3-Point beginners guide to lucrative investing

3-Point beginners guide to lucrative investing

Investing is one of the best things you can do to improve the quality of life and that of significant others and dependents. It helps you remain financially secure both in the present and in the future. However, fear and little knowledge about how to go about it hold most people back, according to most investors’ forums like Investors Hangout. Most people also believe that they have to go through the hustle and hefty consultation fees of finding a financial advisor to help make those critical decisions. This concise guide will show you exactly what decisions you need to make and the factors to consider while at it:

Decide the type of assets you’d like to own

The best way to get some returns in the future from the money you invest today is by obtaining productive assets.

For instance, an antique mug may or may not be worth more money 50 years from now, but a productive asset like an apartment building will give you cash over those years. There are many types of productive assets for you to choose from, all of which have merits and demerits. Real estate is the most easily understood example of productive assets, where you can develop some property and selling it at a profit, or rent it out. Intangible properties are another class and include patents, copyrights, and music royalties. However, the most rewarding type of productive assets would be business equity, where you can buy the shares of a listed company then earn a part of their profit.

Decide how you’d like to own these assets

The next crucial decision is on how to acquire your assets.

There are two options; outright and pooled ownership. In case you opt for outright ownership, you will purchase company shares or any other asset directly. For instance, if you choose to buy company shares, you get access to dividends every time the company makes profit, which means that your net worth rises with that of the company.

On the other hand, in pooled ownership, you combine your funds with those of other investors and buy shares through a shared entity. This mainly works through mutual funds and is highly recommended when investing large sums of money. There are mechanisms like index funds that give shared entities access to diversified portfolios at lower rates than individuals opting for outright ownership.

Decide where you want to hold these assets

There are three options to choose from: Tax shelters; which are an excellent option if you have a personal investment like a Roth IRA. They offer you great tax benefits and asset protection like unlimited bankruptcy benefits. Trusts are another great option if you’d like to have a say in the usage of your capital. Taxable accounts are the third option, where you can deposit as much money as you want without limit every year, but is subject to taxes.

Conclusion:

This guide is your first step towards financial freedom. If you go ahead and invest whatever funds you have, you get money from passive sources like interests, dividends, and rents.

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