It’s easy to think that you can make your money grow when you start off with money to invest. The financial industry is full of all kinds of products that promise to deliver strong passive income for years to come. But are all those product offering good investment ideas necessarily?
Not exactly. The one thing you must be cautious of as an investor is what your potential for risk will be. You certainly don’t want to go putting your money into something that could default or go bust. Therefore you need to have a general understanding of the foundation for your investment choices before deciding on what you should invest in.
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The Foundation of Good Investment Ideas:
No matter which of the ways you decide to invest your money to try to make it grow or achieve some decent rate of return, there will always be some amount of risk you have to burden. That is one of the underlying principles of making money – knowing what the risk versus reward relationship will be.
But is the relationship between risk and reward always proportional? Just because something has a higher rate of return, does that necessarily mean that it carries more risk? Sometimes, but not always. Some financial selections are better at keeping down risk than others, and those ones are definitely the kind of good investment ideas you’ll want to associate yourself with.
Here’s a few good types of investments you should get to know and learn more about:
Real Estate or REIT’s:
Sure the housing market crashed. But have you ever heard the term “buy low, sell high”? Doesn’t buying houses on sale seem like a better idea than paying full price?
If you have any doubts about the market making a rebound, then you should know that in 2013 housing values bounced upward an average of 12.4% for the year according to CNN Money. Since home values have not returned back to where they were pre-crash, that should only tell you that we’ve got no where to go but up!
If you’re feeling a little skittish about owning actual individual properties, a good alternative would be to invest in an REIT (real estate investment trust). This is a little bit more like a mutual fund but it carries a lot of different rules. They’ve also been known to have great dividend payouts!
Dividend Stocks:
Even though dividend stocks seem to be trendy right now (since bank interest rates are so low), they’ve actually been among the list of good investment ideas for the better part of a century! The big draw to them is:
- Semi-guaranteed rates of return from the annual dividend payments
- The prospect of capital gains from investing in strong, large cap companies
- Tax efficiency
If you’d like to buy some for yourself, try looking in the Dow Jones Industrial average for ones that have strong fundamentals and a good outlook for the upcoming year.
Alternative Mutual Funds:
Everyone owns stock and bond mutual funds. Why not use a good idea by diversifying in some alternative sectors? Try:
- Precious Metals – Gold, silver, etc have been down lately in 2013. Does that mean a possible rebound in the upcoming year?
- Energy – Earlier this year, Frobes ran their picks for which energy companies to invest in. A good mutual fund will likely already target some of these names and capture those returns.
- Healthcare – As the baby boomer generation ages, the cost of health care will only continue to rise. Why not be a part of that growth?
Small Business:
Nothing beats being your own boss and experiencing financial freedom through bringing your own food to the table. Though you could go the traditional route of owning a brick and mortar type business (like a café, store, office, etc), feel free to think outside the box or even virtual!
For example: I was looking for a tent with some tables and chairs to rent for a party. I discovered that for a few times more than the price of the rental, I could buy a tent, table, and chairs, and rent them out each day for a little passive income.
If the thought of not getting paid for your services scares you, one interesting thing is that you can use invoice financing services to bypass waiting 60 days or so to collect your payments. Invoice financing works by providing your business with the cash it is due to receive from customers that are yet to pay, in advance. Rather than waiting anywhere between 14 to 120 days, or whatever the pre-agreed payment period was, your business will have the finances much sooner to reinvest and grow quickly.
Remember that a business does not have to “physical”. Why not start a blog to make money? Or how about taking on free-lance writing gigs? Or recording music to be licensed to potential advertisers? All of these things would qualify as good investment ideas because they require such low capital to get started. But depending on your talent and the amount of effort you’re willing to put in, the payoff could be huge!
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