The year 2020 has become a harsh criticism of financial literacy for everyone without exception. Those who are used to spending all their money find themselves in a difficult situation. People who keep a close eye on their finances and regularly save and invest at least a small part of their income have appreciated how important it is to have a backup and a “safety cushion”.
“What’s the best way to invest money?” – After the job situation has stabilised, this is a question many people have asked themselves. Today, everyone wants to find a monthly passive income option or a way to save and multiply available funds.
It is not easy for a newcomer to figure out what is the best way to invest their money. You need to get your finances in order before you look for good investments.
- Have a “safety cushion” ready – an amount that you can live on for 2 or 3 months in case you lose your job.
- Determine how much you can easily save each month. This will be the amount that you will invest. Usually, it’s 15% of your income.
- Decide how much risk you are willing to take. There is an unspoken rule in the investment world: the higher the risk, the higher the return. If you don’t have the time and energy for in-depth analytics, choose less profitable, but at the same time safer options.
So, now we can look at popular ways of investing money.
How and Where to Invest Money
Another rule of investing: don’t put all your eggs in one basket. This means that when choosing where best to invest your money, you should focus on 2 or 3 options. That way, if you lose money on one investment, you will probably make up for it on the other.
Bank deposit
This option is suitable for those who have a small amount at their disposal.
Advantages of a bank deposit:
- allows you to cover losses from inflation – the annual decline in the purchasing power of money;
- the guarantee of repayment depends on the reputation and reliability of the bank.
Cons:
- low annual interest yields negligible returns;
- many banks have deposit programmes for 3 years or more.
Buying currency or precious metals
This investment method is simple: you can buy and sell currencies in a mobile app. If you follow the political situation in the world, you will be able to predict how currencies will behave on exchanges. Or you can simply buy silver coins.
What to invest in if you have a lot of money
If you have big savings, you can think about making big investments. People that invest such an amount want to receive a monthly income of a decent size. Real estate is an excellent solution to this problem:
- A flat or house in a resort area for renting to holidaymakers;
- A flat or house to rent abroad to travellers.
In both cases, long-term tenants can be found. However, the second one is attractive because you will get the rent in foreign currency, which means that you will also benefit from the conversion.
Experts believe that the most profitable investment compared to the above is real estate. Over time, it pays for itself and starts generating income. A few one-bedroom flats or small houses in a resort area can eventually give you the opportunity not to work at all.
Investing abroad for individuals is not much different from investing at home. The options are almost the same: banks, real estate. You can think about buying shares of a company, but this method does not guarantee a profit: the value of the firm can suddenly collapse with the appearance of a strong competitor in the market.
A profitable investment abroad for legal entities is to invest in property development. This means that your firm channels money into renovation, construction projects, etc. Often the return on such a deal is 7-10% per annum. Such an investment requires a large amount of money, and there is a risk that the desired returns may not be received due to political or natural factors.
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