If you’re a business owner with a lot of capital, then you may be wondering what to do with any excess funds. After all, there’s only so much you can blow on your own leisure! Many successful people choose to invest their excess capital, and watch it grow over a long period of time. If you’re interested in this too, then you probably know something about the options available to you. But which one’s for you? Here’s an introduction to three of the best kinds of long-term investments.
We’ll start off with stocks. If there’s one kind of long-term security you’ve heard of, then I bet it’s these! As you’re probably aware, purchasing stocks gives you a fraction of ownership of the company you’re investing in. This means that the way your investment performs hinges somewhat on the way the company performs. More accurately, your returns will be tied to the popularity of the stock among other investors. This is because, in the short-term, the value of a share is determined by the actions of other investors. So, if the value of your stocks increases, you’ll be able to sell it for a higher price and get a good return. If the value drops, you’ll be making a loss if you sold them. Sounds nice and simple, right? Compared to some other forms of investing, yes. It doesn’t stop there though! Some companies will have the option to pay dividends. A dividend is basically the act of returning some of the business’s profits to its shareholders. These can be paid either in cash, or in further shares and stock. However you receive them, dividends will invariably increase your ROI. You do all your trading through exchanges, such as the New York or London stock exchange. Alternatively, you could hire a broker like IG.
So is this kind of investing for you? I wouldn’t rush straight into it, as investing in stocks can be very risky. You’ll need to learn more than a few patterns and subtleties of how stock values rise and fall. Bear in mind that a lot of professional traders still make losses! Frequent buying and selling can rack up fees as well. Therefore, it’s usually better for you to hold onto shares for at least a year. Be sure to target a company which shows promise in the long term, rather than acting on tips and rumours.
Next we have property investment. This is pretty popular among new investors for a number of reasons. It’s far easier to understand compared to forex or the stock exchange. It isn’t subject to such short-term changes, and healthy growth is pretty easy to secure. That’s not to say it’s impossible to make a loss in the property game! However, when the value of your property is falling, you’ll have plenty of time to act. One thing which sets property investment aside from others is an extra source of revenue! When you own a property, you can gather even more capital through renting it out to tenants. The main drawbacks of this kind of investment is the high entry and exit costs. You’ll need to be bringing in quite a lot from other ventures if you hope to make any serious money through property investment. You can, of course, borrow in order to invest. However, there are a lot of extra costs you’ll have to pay up-front like stamp duty. After that, there’ll be landlord insurance, building insurance, and property management costs. This is all before you get onto any maintenance you might want! Being an illiquid security, you also won’t be able to sell your property at the drop of a hat. All these complications are why a lot of investors hire specialists like Experience Invest.
This is probably the best choice for people who got scared off by the fast pace of the stock exchange. There are a range of reasons why people choose to invest in property. Firstly, it’s considered to be fairly safe. There’s continual population growth, residential development, and housing undersupply in a lot of developed countries. This all means that you can make a killing investing in property. It’s also pretty easy to understand for new investors. Property is tangible, and can be improved upon fairly inexpensively. Naturally, it’s also a long-term investment, and isn’t anywhere near as volatile as shares.
Finally, we have bonds. This is a pretty broad topic. Buying bonds can entail lending money to a business, a government or another entity. The amount you put in will be paid back over time, and will be bolstered by interest. This rate of interest can fluctuate pretty wildly from investment to investment. Mainly, it hinges on the probability that the original amount will be paid back. As you can see, this is something more geared towards experienced, business-savvy investors. Loans with more risk will build up more interest, true. However, there’s still a danger of the borrower defaulting on the loan, and you making a loss. The value of the bond will rise and fall depending on prevailing interest rates, and the financial situation of the borrower.
As you can see from these traits, investing in bonds is a lot safer than stocks and other options. However, because they’re more stable, you’re not going to have much chance of getting incredible returns. As with property investment, there’s no way of telling if a bond is 100% “safe”. You shouldn’t try your hand at this without doing a lot of homework. When considering a bond, make sure you do a lot of thorough research into it. If you’re looking for the safest route in, go with bonds backed by the government of a developed, democratic country. Many of these come with a guarantee that it won’t be defaulted on. However, the interest rate is very modest.
There you have three of the best ideas for long-term investment. Making money through these channels isn’t simple. However, with a careful approach, they can be a wonderful benefit to your personal finances.