Are you looking for the perfect investment? As an investor you are looking for the most profitable investment. In this article we examine the best investments suitable for you.
Is there a perfect investment?
There is no universal perfect investment. There is, however, a perfect investment for you as an individual. It is therefore important to determine for yourself what you want to achieve with your investments. Some investment products carry higher risks, but also offer higher potential returns, while other investment products mainly offer a stable return. In this article, we discuss the most profitable investments.
Profitable investment in derivatives
For active investors who are not afraid of a little risk, derivatives are the perfect investment. Derivatives come in all shapes and sizes: options, futures and CFDs are some examples. CFDs in particular are becoming increasingly popular, partly due to the transparent pricing of the security.
With CFDs you can actively speculate on price rises and falls on, for example, stocks. With derivatives you can achieve a considerable price gain in the short term: you do this by opening positions on both rising and falling prices. With a short position you can benefit from a falling share price, allowing you to achieve a good result even in worse economic times.
With Plus500 you can try trading CFDs entirely risk-free with a free demo. Use the button below to instantly open a demo on Plus500:
Are stocks the best investment?
For many people, investing in stocks is the perfect investment. In both Europe and the US, the profit prospects for companies are still good. Especially when you compare shares with other investments, they perform much better than many other investment products in the long run.
You can choose to invest in shares with a commission-free broker. In this way, you do not lose any money in transaction costs, enabling you to achieve better results. A reliable commission free stockbroker is eToro, use the button below to directly open an account:
Investing in a fund is for many people the best investment option
For the vast majority of investors, investing money in an investment fund is the best option. Index funds or ETF’s, in particular, are attractive, as the costs are low for this type of fund. With an index fund, you can automatically trade in a basket of stocks. This allows you to spread your risk: if one investment product does not perform well, you can absorb the fall with favourable results in another investment product.
What makes ETFs profitable is the fact that you can buy them periodically with a small amount of money. As a result, you never step in with all your money at the peak of the market, which increases your chances of achieving a profitable result.
Would you like to try investing in ETFs yourself? In that case, you should open an account with DEGIRO! At DEGIRO you pay no transaction costs when you buy funds from the core selection. Use the button below to directly open an account with DEGIRO:
If you are currently looking for the perfect investment, then commodities may also be an attractive option. When the global economy picks up, the demand for raw materials will increase and so will their prices. But even if the economy slows down, there will still be a demand for certain raw materials. Think, for example, of oil, which is still enormously important to our economy, or gold, which is often used as a safe haven.
As an investor, you can invest in commodities in times of crisis, which can compensate for losses on, for example, shares. Certainly in the long term, there will always be a demand for raw materials.
How to perfectly invest in commodities?
It is important to select the right raw material. In times of uncertainty gold often rises, while the demand for a building material like steel rises when the economy is doing well. Due to the scarcity of many raw materials, prices will continue to rise sharply in the long term, as a result of which raw materials can be seen as the perfect investment.
Trading in CFD raw materials is best done with the broker Plus500. Plus500 allows you to trade without paying commissions and with a demo of $40,000. For the long term it is wiser to invest in commodities either physically or through a fund. Do you want to know where to invest in commodities? Take a look at our overview of brokers:
Investing money in bonds
Investments in bonds have not been the best choice, at least over the last 100 years. The profitability of bonds lags behind the profitability of stocks. Bonds have a safe image: this too is not entirely justified. You can lose a lot of money with bonds, especially when interest rates rise. The price of the bond then drops and you cannot put the money stuck in the bond into more profitable options.
Moreover, the highest profits can only be achieved with the very risky bonds. An example of such a risky investment is buying a bond of an unknown South American company. If this company subsequently goes bankrupt, you lose the full amount of your investment.
Bitcoins are the perfect investment for some
For some investors Bitcoins are the perfect investment. When you buy a Bitcoin, you are actually investing in hope. The currency itself is hardly used, but the blockchain behind the Bitcoin is very promising. You have to take an active stance to get a good result with an investment in the Bitcoin: if you step in at the wrong time, you can quickly lose many thousands of dollars.
Bitcoins are therefore by no means a safe investment and, in my opinion, the cryptocurrency does not yet deserve the predicate of perfect investment. Nevertheless, for the investor who does not mind taking greater risks, it may be attractive to invest a small proportion of his or her assets in the cryptocurrency.
Is gold the most profitable?
Gold is the perfect investment for the eternal pessimist. If you think the system is going to collapse, you can invest in gold. In practice, gold does particularly well when the stock markets fall in value. At such a time, an investment in gold can protect your investment portfolio: we call a similar construction a hedge.
A major disadvantage of investing in gold is the fact that you do not receive any income. Gold is stored in a safe and does not generate additional value. With an investment in gold, you therefore do not receive any income in the form of dividends or interest. In my opinion, investing in gold is therefore not perfect: yet gold can be the best investment option in times of crisis.
Don't do it (too much): saving
Saving is never the best or most profitable. As a result of inflation, the price level rises every year. The interest rate on savings is low, which only decreases the value of your assets.
Incidentally, this does not mean that you should not save at all: it is, of course, important to set aside enough money to be able to pay for unexpected repairs, for example.
Investing in real estate is perfect for people with a lot of capital
A real estate investment can be very attractive, as long as you have enough capital and income to raise the money. When this is the case, real estate allows you to benefit from complete control. You can both build up an income by renting out the property, and you will benefit from increases in value in the long term. In addition, real estate protects you against inflation.
Investing in housing is very attractive: however, it is important to perform solid research. Investing in real estate is only profitable for the investor who researches the possibilities. There is a lot of time involved in finding the perfect home, and you also have to take the necessary steps to manage it. Therefore, do not think to light-hearted about investing in real estate!
What is the best time to invest?
If you want to make the perfect investment, you also need to select a good entry point. If you want to actively beat the market, you will need to analyse the market carefully. By stepping in at a relatively cheap moment, you can achieve a price gain. In most cases, it is not easy to predict the market well: for most people the entry moment is therefore not critical.
For most people, the best strategy is to invest money in the stock market periodically. Beating the market is very difficult and the stock market can crash at any time. It is a shame to lose a large part of your investment when the price drops sharply. By investing a smaller amount monthly, you invest money both when the stock market is under- and over performing. This makes it possible to benefit from the average stock market return, which is between six and eight percent on an annual basis.
In addition, remember that time is more important than timing. If you happen to time an investment well, you can expect a high price gain from it. However, if you step in at a less fortunate moment, then this is not a disaster either. As long as you have enough time to wait for recovery, you can achieve a positive investment result in the long term.
How do you decide what is the best investment for you?
What is the best investment is rather personal. We are therefore happy to help you determine what is the perfect investment for you. Incidentally, this does not always have to be the most profitable investment: you should still be able to get some sleep at night.
Define your goal
Before you can determine the perfect investment for you, you must first determine what you want to achieve with your money. Do you want to access your money in a few years or do you have decades? If you have more time you can afford it to take higher risks. By drawing up a plan with a clear goal and time frame, you can determine which investment product suits you best.
Quantify your investments
Investments are expressed in hard numbers: your return is a percentage and the money you spend is a number. It is therefore wise to assess the amount of money you can invest (periodically). This allows you to determine to what extent you can spread your money over different investment products and strategies.
What is your risk appetite?
Before you decide what the best investment for you is, you need to establish your risk appetite. The risk appetite varies greatly from person to person. If you don't mind taking bigger risks, your willingness to take risks is higher. More speculative investment products such as bitcoins and derivatives are the best option for you. Would you prefer to build up a bit more capital prudently? In that case, it is better to invest in relatively safe stocks and bonds.
Pay attention to the costs
Many people forget to pay attention to costs in their search for the perfect investment which is a shame. When you waste a lot of money on high transaction fees, you reduce the chance of achieving a profitable result. Therefore, always study the costs of the investment product you want to invest in first.
Diversify & stay alert
If you are looking for the perfect investment, it is especially important to spread your investments over different products & time. A smart investor always stays alert: after all, the future is uncertain and managing your risks increases your chance of success. In addition to your physical investments, you can use options to protect your portfolio. It is always advisable to keep enough cash in a savings account, so you can enter the market as soon as there is a chance of a high return.
If you are looking for the perfect investment, always remember to diversify your investments to reduce the risk of loss. Another good tip is to explore opportunities to invest in emerging countries. In addition, when making your choice, always pay very close attention to the dividend yield of companies.