The arrival of the internet created a lot of new investment possibilities. Investing successfully is now something we have to do on our own. When can we say an investment was a success?
A successful investment
Clearly, a losing investment can never be considered a successful investment. To be able to say it was a successful investment, your profits need to be higher than the inflation rate. When this isn’t the case, the real value of your funds has decreased and you will be able to buy less and less with the same amount of money. So, what are some good investment possibilities?
What can you invest in?
- Derivatives: with derivatives you can make a lot of money and build an income.
- Bonds: bonds are a relatively safe investment with a small and safe return.
- Stocks: by selecting stocks you can build up a nice amount of capital and make money.
- Real estate: by finding tenants and buying property you can make money.
Building up capital
Before you start to physically invest in stocks and real estate, you should build up a decent income and capital. One of the best ways to realize this is by trading derivatives. By trading derivatives you buy and sell contracts on the underlying value of an instrument. If you think the price of a stock will go up soon, you can sign a contract for this stock. When the price does go up, you make money. But what are the actual benefits of investing this way instead of the more traditional way of investing?
- Because you trade the underlying value, you can buy and sell really fast.
- The fees are a lot lower.
- By using leverage you can build up a lot of capital really fast.
- You also have the option to sell and make money when prices go down.
Want to try-out this new way of investing yourself? Open a free demo account with a broker!
What to do with income from trading?
The income that you make trading can be used to obtain more assets. Take a little from your profits to live off of and keep an amount on your balance as a reserve. Use the rest for physical investments.
Before you start investing in physical financial instruments, it’s important that you know how this works. Unlike with trading, you buy stocks for the long term. Therefore you should study the intrinsic value of the company or real estate.
Start with stocks
Start buying stocks. Stocks usually pay you dividends and a price increase increases the value of your assets. Select stocks based on expected results within the company and sector. Also keep in mind the financial position of the company by doing extensive research on the reserves, deprecation, profits etc.
Strong in real estate
Once you’ve built a strong cash flow, it’s time to start investing in real estate. With real estate you usually build up a huge debt in the form of one or multiple mortgages. To survive empty properties, it’s important that you have a proper income stream from other sources.
To really trade and invest successfully, it’s important that you gain experience. Start small, but invest with real money. That way you learn how to deal with losses and you discover how the financial world works. To execute a successful investment, you need a high financial IQ, but thanks to online trading you can get started without having all the answers.