More On Investing
What do you do with the money that you’ve budgeted to save? The best thing for long-term success is to invest it, but how. Luckily, you have many options to choose from, like the stock market, real estate or even cryptocurrency.
Investing versus Saving
Investing is best for long-term goals, like retirement. Investing gives you growth over liquid assets and counters inflation. Your money is working on itself, whether the economy is booming, the area you’ve got real estate in is rising or you’ve backed a startup that is taking off. The money you’ve invested will have a return when you go to use it down the road.
Saving is best for short-term goals where you can easily access this money. The downside of stashing the money away in a high-yield savings account or Certificate of Deposit (CD) is inflation, currently at 3%. This means that if you put $100 dollars in your sock drawer for next year, your spending power will be roughly $97. You effectively have less money than the previous year.
Stock Market Investing:
When a business is doing well, its stock prices are higher. When it’s not doing well, its stock prices are lower.
There are two ways you can earn money from stocks.
Appreciation – when the price of your stock goes up, you can sell your stocks.
Imagine you purchased a thousand stocks at $100 apiece. Over time, your stocks go up and up and up — until they are worth $200 each.
You could cash out and sell your stocks for $200 each — congratulations — you earned $100,000! Or, you can reinvest your earnings and try to get that $100,000 to earn even more money.
Dividends – When a company is doing well, its board of directors distributes a portion of its earnings back to the stockholders.
- Cash dividends return cash to stockholders.
- Stock dividends give more shares to stockholders. It's a way for investors to compound their investments.
Reinvesting dividends, over decades, is how people like Grace Groner and Sylvia Bloom ended up as multi-millionaires, even without big salaries.
So, instead of thinking about how you can turn your earnings into cash, think about how much wealth you’ll build by continually reinvesting your stock earnings.
Real Estate Investing:
When we use the term “real estate investing,” it refers to a specific approach that does not include flipping and reselling for profit, which are considered “real estate trading” rather than investing.
Real estate investing creates a stream of passive income with one simple idea: you buy properties and rent them out to other people.
The rent you earn from those properties becomes a passive source of income, leaving your time free to do other things such as work, run a business, search for more investments, or enjoy some free time.
Real estate investors purchase residential and/or commercial properties such as single-family homes, office buildings, and retail spaces, for the sole purpose of renting them out to tenants to generate passive income.
Investing in real estate is one of the best ways to build wealth for several reasons.
First, the passive income stream you get from rental properties leaves your time free to generate even more money.
Second, real estate investing provides tax benefits that help you build wealth more quickly.
Third, no matter what the economic situation, people will always need a place to live. This makes real estate a solid investment for the long-term.
Real estate investing also gives you a tangible, physical asset that you own – whether or not you’re collecting an income from it. This doesn’t mean that you’re guaranteed to make a profit or that real estate is not without risk.
Cryptocurrency is a decentralized global digital currency that has been around since 2009. It doesn’t have a bill or coin or any other physical equivalent; like we said, it is digital, meaning it’s completely virtual or online.
It can be used to pay for goods and services in a quick manner, but only by those businesses who accept cryptocurrency of course. In addition, many companies have issued their own virtual currencies, also referred to as tokens, with which you can buy their products or services.
Perhaps its most beneficial attribute for users is that it can be transferred online from one individual to another without requiring an intermediary financial institution like a bank.
There are other ways to invest your money for long-term financial success. Figure out what interests you and how you personally will succeed based on your goals and strategies.
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