Investments That Build Personal Wealth
The real investments do not promise getting rich quickly. While there are few investments that guarantee huge profits, the risks are too much to handle.
If you can earn a fortune in few days, you can also lose all your money instantly if risks are not handled very well.
If your resources are scarce, you might find it wise to study the investment carefully.
A slowly-but-surely investor opts for investments that provide long-term results, with flexible time frames, manageable or customizable risks. Investments that need careful analysis, evaluation and research may have terms such as 5, 10, 15, 20 and 25 years.
While the terms are long, you can use the time to study the market and make the necessary actions to protect your investments. Here are few of the investments that build personal wealth.
1. Buying stocks. Becoming a part-owner of a company is an excellent tool to invest your financial resources. The shares of stocks can be procured through an organized stock exchange such as New York Stock Exchange and NASDAQ Stock Exchange, stock broker, over-the-counter or direct purchases.
Upon buying stocks, you become a part-owner of the company. As a stockholder, you can earn profits in two approaches. You can receive dividend payments, and you can sell the stocks that have appreciated.
The dividend is an income distribution by corporations to their stockholders. The dividend payment is usually done made quarterly.
The stock appreciation means an increase in the value of stock in the company. The value increment is typically based on its capacity to make money. Hence, if the company does not perform very well, its stock value may depreciate, or go down.
The risks involved vary according to the company. To build personal wealth through stocks, you have to study the capacity of the company to make money. You can base your judgments from its past performance, management, products and how the stocks have been given value in the past.
You can read reviews and listen to what the experts say on the stock market especially on a particular company, its financial performance and stock value. Only knowledgeable investors succeed.
2. Buying bonds. When you purchase bonds, you are lending your money to a federal or state agency, municipality or other issuers like a corporation. An issuer promises to pay a state rate of interest during the term of the bond, and repay the entire face value when the bond matures.
The interest a bond pays is based on the credit quality of an issuer and current interest rates. The rating for municipal bonds is based on the creditworthiness of an issuer. Issuers that have the greatest chances of paying back the money have the highest ratings, and their bonds pay an investor a lower rate of interest.
3. Mutual funds. The mutual funds are created to invest a group of people's money in several firms. If you have bought mutual fund shares, you have become a shareholder of a fund that has invested in several companies.
Mutual funds, through diversification, scatter the risk across the companies. To build personal wealth through mutual funds, better study the performance of the companies the mutual funds have invested in. Analyze their financial performance and market value.
by: Charles Godbout