However, investing remains one of the best ways to get your money to work for you, earning more money while you sleep. Here are five things to watch for in a good investment to make them count:
1. Hedge Your Bets
Never put your whole nest egg into one investment. If you want a limited number of funds, consider a mutual or index fund that will continue to do well even if one sector of the market is in trouble, due to the wide number and variety of stocks in the collection. Your age and your risk tolerance can help you to determine the right formula of safe but slow-growing accounts vs high-yield but risky ones. The older you are and the more important that money is to your future survival, the less risk you may want to take. However, if you are young and can stand to lose and regain a portion of your account balance, you may find that you have more overall money when you need it at the end of your career.
2. Rebalance
If you do well in one market and poorly to another, it is wise to stick to your initial investment distribution strategy and move some of the profits from one area into the other. You will be buying at a fire sale price from one, and saving profits that may crash in another area. Since many stocks are cyclical, moving fast-growing money into a safe, slow-moving area will often mean more long-term money.
3. Make It Automatic
The best way to be certain to invest is to make sure you are paying yourself first. If it is one of the first things out of your paycheck, you’re more likely to be able to ensure your investments. Most investment plans allow for automatic deposits of a monthly fee. Additionally, there are now a number of plans that will round up the dollar value of every purchase you make and place it into savings or an investment program automatically for you.
4. Diversify beyond the Market
If you are doing well, you may want to consider a different income source as well. Companies like Success Path can teach you how to invest in real estate to make a profit with very little effort on your behalf. The company specializes in flipping homes, and they can teach you how to find an undervalued property in a valuable or up-and-coming market. They know which improvements pay for themselves, and what features make a home sell quickly at a premium.
Other diversified investments can include microlending, which means that you act as a bank and offer small loans to those looking for debt consolidation or small business startups, or buying real estate to use as a rental home or vacation rental. Check out companies like Success Path on the BBB and see what ways you can diversify.
5. Get Paid Twice
The best investments are those where you have multiple streams of income. Rental houses that are increasing in value while giving you rent are a great example of that. Steady-priced stocks that pay regular dividends are another great example. The more that you can reinvest one of these income streams into the other, like automatically reinvesting your dividends, the better you will do in the long run.
There are a number of great ways that you can take your money and make it work as hard for you as you did to earn it. The smarter and more diversified you are with your investment choices, the better you and your net worth will likely do in the long run.
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- For Dummies
- Kathleen Brooks, Brian Dolan
- Publisher: For Dummies
- Brent Donnelly
- Publisher: Wiley
- Edition no. 1 (06/12/2019)
- Jim Brown
- Publisher: CreateSpace Independent Publishing Platform
- Paperback: 87 pages
Last update on 2020-03-20 / Affiliate links / Images from Amazon Product Advertising API
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