10 investment ideas to build more wealth
Do you know how to make your money grow? Let’s start this off with an exercise of sorts. If you put a dollar bill on your table and just stare at it what happens to it? Everyday that you stare at that dollar it is going down in value. It will buy you less stuff. What you could buy in 1950 for $1 would cost you $9.96 today. You see how the value of a dollar continues to slide down if you don’t do anything to protect and grow your money? Everyday you need more $’s to buy the same stuff. Wouldn’t you like to make smart decisions around money so that inflation and bad decisions don’t whittle away at your wealth? The whole goal is to have your money making you money so you don’t have to work so hard or at least can enjoy a better quality of life as inflation keeps rearing its ugly head. Unfortunately, the old adage of a penny saved is a penny earned is only true if you are helping to grow those pennies into more pennies. Imagine if you had $100,000 in 1950 and you just kept it on your kitchen table until 2017. That $100,000 would only be worth about $10,000 today. Yikes! Today we’re going to go over some basic investing ideas that could help you create wealth that exceeds the rate of inflation.
Most people think of Gold and Silver when it comes to precious metals. Although those are the most popular there are others that are worth taking a look at. Palladium, Copper, Platinum are a few other major metals that are traded on a daily basis.
Many precious metals are not only used for investing but also necessary for commercial products. The majority of gold is used in jewelry but did you know gold is used in manufacturing almost all of our modern electronic devices including medical equipment? Gold is a very efficient conductor and never tarnishes making it very useful in connecting wires in intricate devices.
The price of gold in 2000 was roughly $270, today it’s around $1200. That’s over a 400% return if you just bought gold and held on to it. If you bought $100,000 of gold in 2000 it would be worth over $400,000 today. That is a staggering improvement of wealth in just 16 years. That equates to a 25% return on your initial investment for 16 years straight.
It’s not always sunshine and roses for gold though. If you were to buy an ounce of gold in 1980 you would’ve paid about $590> If you held it for 20 years you would have actually lost money because like we mentioned the price of gold in 2000 was around $270.
We share both of these scenarios with you because investing is not a one-way street. Although there are possibilities to increase your wealth with investing it is also possible to lose money while investing. The price of gold to date typically has a direct opposite relationship with the US dollar. If the dollar is strong then gold is weaker. If the dollar loses value then people typically place more value on gold. At the end of the day gold, not the US dollar is a historical holder of value. People were using gold as currency thousands of years ago.
Silver is considered by many to be the step-brother to gold. This is solely because the price of silver is historically much less than gold and there is a lot more of it then gold. That does not diminish how awesome silver is. Although it is mainly used in jewelry and silverware it is also used in electronic devices because it is known as the best conductor on the planet. In the year 2000 silver was just under $4 and today it’s about $17.50. That is also over 400% return if you would have bought in 2000 and still had it today. Again 25% per year return on your initial investment. The ratio of gold price to silver is fairly consistent and the price trades somewhat accordingly.
Platinum is mainly used in jewelry and in catalytic converters in most vehicles.
Copper is used in wires and other electronic devices.
Palladium is also used in catalytic reactions.
Commodities are raw materials and agricultural items that are traded via stock markets. These include sugar, corn, soybeans, wheat, cattle, cocoa, coffee, cotton, metals and different types of oil. One of the most popular ways to trade commodities is through futures contracts. A futures contract is a contract to pay a specific price at a specific time in the future for a particular commodity. If you hold the contract to it’s expiration date you would be able to take possession of the physical product. Most traders are commercial and/or institutional users of the commodity and use futures contracts as a way to hedge against a financial loss. Many speculators also participate in the commodity futures market.
In order to trade commodities, you will need to open a brokerage account. You will need to authorize a form that indicates that you understand the risks of investing in futures contracts.
Futures contracts are volatile and use a lot of leverage. This allows you to control a lot for a minimum amount in your brokerage account. However, your account can double or sink in mere minutes and will show up in your account in real time. If the futures contract goes against you then you’ll get a margin call. A margin call is when the brokerage company requires you to immediately transfer funds to your account to cover your losses or close your positions.
Most commodities also have options available to trade as well. Options allow you to trade commodities with a maximum loss of the price you paid for the option contract.
An even less volatile way to trade commodities is through individual underlying stocks that produce or manufacture equipment for commodities.
ETF’s (exchange traded funds) and mutual funds allow you to own a basket of commodity stocks with less volatility.
A bond is a debt instrument or loan. When a company, institution or government needs to raise money they will sell bonds. The bond will have a rating based on how safe it is. Safe means how likely the bond issuer is to pay the interest payments and the full amount of the bond at expiration. It’s a measure of stability rated from AAA to D. Most bonds are issued in $100 or $1000 increments and will pay interest, called the coupon rate. They typically pay annually or bi-annually, called the coupon date until the bond expires. The bond expiration date is called the maturity date. Upon maturity, the face value of the bond will be paid.
Bonds are also traded on the market and will gain or lose value based on the how interest rates for similar bonds are selling for. For example, let’s say you paid $1000 for a bond that pays 5% interest. If interest rates for similar bonds are at 4% then your bond will go up in value because your interest payments are 5%. In this example, you may be able to sell your bond for $1100. If you sold your bond you would forego the interest payments but will make $100 in this transaction.
Consequently, if interest rates go up then your bond will be worth less, if you sell it. If a similar bond has an interest rate of 6% then yours would be worth less in the market. Of course, you don’t lose any money on your bond if you just keep it until expiration.
There are many different varieties of bonds to choose from but what we’ve gone over are the basics to bond investing. It is considered by many to be one of the safest investments available. You typically will not get super high returns but on the flip side you are far less likely to lose money in high rated bonds.
Real estate offers many ways to invest and grow your wealth. From buying and selling land, residential property to apartments and commercial property. (get pic real estate value over time)
Art and Wine
These are considered alternative asset classes. They are not mainstream and typically require substantial funds to participate. They are a pure play on supply and demand. There is only so much supply of original art or vintage wine. Sometimes people get super lucky and find a valuable piece of art at a garage sale like Andy Fields did. He bought a sketch at a yard sale for $5 and then after having it checked found out it is possibly the earliest know Andy Warhol creative and could be valued at over 2 million dollars.
When investing in jewelry it’s best to stick with high-quality brands like Tiffany, Cartier, and Rolex. If you’re interested in diamonds it’s best to look for quality, not quantity.
The New York Stock Exchange has over 2500 companies listed and in any given day over a billion shares trade hands. There are numerous ways to invest in the stock market. Some folks trade daily to try to make small profits consistently. Most day traders use options as a way to leverage their trades without losing more then what is invested. Most people follow a buy and hold strategy. That is the easiest to manage because you’re not looking at the daily gyrations of your positions.
Warren Buffet believes in investing in teams before buying stocks. He knows a thing or two about picking stocks. He’s the world’s richest stock investor of all time. He’s worth over 60 billion dollars.
Index Funds are a mutual fund designed to mimic an index. They are considered less risky than individual stocks because they provide a wide exposure with low turnover.
Options are a contract to buy or sell shares at a specified price and time in the future. Most options, however, are traded and ultimately expire worthless. Option traders use leverage to control 100 shares at a time. They can invest in the direction of the stock price without having to buy hundreds of shares.
Forex is a way to invest in currencies. This is a highly leveraged way to invest and requires nerves of steel. You can make a lot of money or lose a lot very quickly.
Mutual Funds are a basket of stocks. So instead of owning one individual stock, you can diversify your risk with a basket of stocks.
Hedge Funds are pools of money managed by professionals. They have much more freedom then mutual funds to invest in strategies that may cause serious losses. Only accredited investors are allowed to invest in hedge funds. Wealthy individuals, pension funds, and institutional investors typically invest in hedge funds.
Have you ever heard the saying “invest in yourself”? Are you doing what you want to do with your life? Taking your money and investing in yourself is many times the best investment you can make. The wealthiest people in the world got there 2 ways - real estate and building businesses. Start Small doing something you love that fills a need or want for your customers. As your business gets more successful you can scale up and hopefully increase efficiencies.
Annuities are contracts made between an insurer and the buyer. The buyer gives a lump sum in exchange for a specified monthly payout for a specific time or as in many cases, life.
If you’re an auto junky then restoring vintage cars can be very profitable. Vintage cars sell for upwards of $100,000 to over $1,000,000.