This article will cover some of the most common investment vehicles. To set things on the same common ground, in this article, investment will refer to monetary investments seeking to generate certain wealth out of it.
Stocks – Value Investing / Analysis System
Stocks: Plural form of “preferred share”. A share which entitles the stockholder to a fixed dividend, whose payment takes priority over ordinary share dividends. It is also known in plain terms as a certain ownership of the company in question. Hence, a great number of (shares, stocks or equity – they mean the same thing), would reflect a greater ownership of that company.
As a stockholder of the company, you are entitled to a portion of the company’s profits and have a claim over its assets. The profits are then paid out in the form of dividends (monthly or yearly basis). That is to say, the greater number of stocks you have in hand, of that particular company, should they have profits, a greater amount of profits will go to you as well.
Usually capable of generating about 10% – 12% ROI (Returns on Investment). However, like most investments, there are no guarantees that money will be made.
Value investing is one of the most commonly known methods for stock-picking. In essence, this technique searches for companies that are trading below their inherent worth and have the potential to increase its stock price in due time.
The key components value investors look out are earnings, book value, cash flow and dividends. Using these determining factors, value investors study companies and deem if those are “value companies” worth investing in.
Warren Buffett is an authority figure when it comes to value investments. There are many courses and seminars out in the market offering to teach ordinary public how to leverage on value investing. Search out for these trainers if you would like to head towards this direction.
Again, this article is just a brief guide on the available options out in the market. For more details on value investing, you may read up more on: http://www.investopedia.com/university/stockpicking/stockpicking3.asp
Unit Trusts & Mutual Funds
It is a pool of funds, amassed with your money and other investors’ money, set to be invested in a particular portfolio of assets according to the fund’s stated objective and investing strategy. This unit trust is managed by the “fund manager”
Unit trusts usually seek capital gain over a period of time. Meanwhile, due to the nature of this investment method, the fund’s diversified portfolio could also mean that risks are better spread out across, not allowing less profitable assets to have a major impact on your investment as a whole.
Such investments also allow you to invest in markets that are typically difficult to enter and allow you to enter at lesser cost. As with most investments, the risks are guaranteed, neither are the profits. However, prior to investing, your financial planner or fund manager would have stated clearly what are the potential risks and prospects of investing in this particular fund. They would also have clearly declared any fees chargeable in the process.
Unit Trusts can usually help people with little knowledge in the investment world. Investors will not be able to influence the investment decision of fund managers. You, as the investor, will be able to choose which fund is suitable for you, according to your objective and risk appetite.
They invest in: financial derivatives, cash or cash-equivalent products, real estate and/or units in other funds.
Foreign Exchange (FOREX)
This video pretty much serves as a very good introductory video to what is FOREX all about.
Gold & Precious Metals
Types of precious metals:
Gold and silver, and sometimes other precious metals, are often seen as hedges against inflation, economic downturn, war, political unrest, currency failure and/or investment market declination. These precious metals are nowadays regarded as investment vehicles and industrial commodities. The demand of precious metals are closely related to their roles as practical uses, investments and a form of stored value.
Traded at the commodity markets, precious metals in their bulk forms are known as bullion and these factors determine their worth:
- Market value
Although many countries mint precious metals into bullion coins, often their face value as money is very much lower than their actual value as a bullion. That is to say, although Canada minted “The Gold Maple Leaf” at a face value of $50, it is worth $1,500 CAD as a bullion.
As of June 02, 2014:
Gold Price per ounce – USD $1,246.30
Gold Price per gram – USD $40.60
Gold Price per kilogram – USD $40, 059.83
There are many various types of real estate investment out there. Some real estate investments give you capital gain, while others give you passive income when you rent them out. Having these two objectives in mind, ask yourself what do you want to benefit out of real estate investment?
While the pros clearly know what they are doing, some offer collaboration and pool your money together with other investments to perform a transaction. In which, you partially own a particular property or building. When the property has been sold off, you benefit from profits. This method increases your capital growth, that is to say, it increases your principle amount – one time.
The other method is to own the property in name, then rent out either the rooms or the entire apartment as a whole. This brings in monthly passive income that may actually set you on the path of financial freedom. Bear in mind though, to factor in maintenance and procedure costs on a monthly basis. Hence to say, if a unit is fetching you $3,000 per month. Allocate at least 10% of that $3,000 to save for future maintenance costs. In this case, it will also be realistic for you to view your monthly passive income from that unit as $2,700 per month.
Take into account how much would you have required to start investing in real estate though. Check with the property gurus around.
There are also investment vehicles out there known as land banking. In which the company offers to be the middle person to facilitate the process where investors can invest money in a certain plot of land in another country, and after which resell after a period of time (usually at least 5 – 10 years or more) and hence to benefit from the profits. The legitimacy of this particular form of investment is controversial and is completely up to the investor’s risk.
“LAND BANKING is the investment strategy of acquiring selected pre-developed land in the growth path of a major metropolitan center, and wait for its value to mature, then sell it for a significant profit in the future.”
This type of investment is a form of long term investment which claim to provide high returns on investment on a long term basis, generating on average about 15%.
Advice: As with any other investments, do your due diligence, or else your money will become the tuition fees for a good life lesson.
Other Alternative Investments
Other forms of investments may come in the form of overseas historical architecture, gaming brokerage, tax liens and so called investments in new technology or business companies. There also many various types of “investments” on the internet that claim to give you royalty for the money you put in, promising to compound and pay you the profits.
The bottomline remains: What is your relationship with money? What are your financial goals?
If you are seeking out for fast money, without knowledge of what you are doing, or without professional advice then you might be paying for a good lesson in life. There are many legitimate companies and investment vehicles out there, as well as, equally as many scams. Investment is good, only if you know clearly what you are doing, or sought professional advice such that you can make an informed decision.
And this might help too. If you were to invest heavily in just one investment vehicle, say about $30,000 , will you be able to handle it emotionally, physically and financially if the entire bulk amount disappears into thin air?
Many companies out there will dish out tons of promises to keep your money safe and secure. Let’s face it, that is how they get you to part your money. But in reality, we really never know. In conclusion, my opinion is, understand why you are investing and consult professional advice to ask if you are heading in the right direction. Should you belong to the employee quadrant, I would highly implore on you to look clearly at your financial situation as well as attitude towards money before you invest.
There is no overnight success and overnight riches. Think long term, be risky but be rationale and sensible. Nourish yourself with sufficient financial knowledge in order to make an informed decision for your family’s future.
Finance is not as hard and complicated as you think. It is fun, have fun.