How To Get Rich? 7 Clever Investment Strategies

Whether you are planning for retirement or just wanting to get the most out of your savings, it is important to know your investment options. But how do you choose where to invest your money, how to do it, or with which product? In this article, we’ll talk about how to get rich quick and the right ways of getting there with investing & other money management tips!

Start by taking a look at your financial goals, risk tolerance, and time horizon to choose the option that will best fit in with your overall strategy. In order to decide on the option, or combination of options that is best in your situation, you must first take a look at the advantages and risks of each.

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1. Individual Stocks

stocksThis option is investing in a specific company. It is actual ownership in the company. So, if the company is doing well and has strong financials, your stock will do well. Conversely, if the company has a down year, your investment will probably not see much return, possibly even a loss.

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Advantages: Individual stocks are investments in a particular company, so even if the overall market is not doing well, but that particular company is, then you still have the potential to see a return on your investment, or even outpace the market. Because this is actual company ownership, you stand to see huge gains, especially if you invest at the ground level and hold on to the stock. You can see your account grow as the company grows.

Disadvantages: Because you are investing in an individual company, your risk is high because your investment is dependent upon the performance of that particular company. Anything from lawsuits to product recalls to competition in the marketplace can affect your stock’s growth and performance. If you choose to invest in individual stocks, it is important to allocate your investment among several companies in order to minimize your overall risk.

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2. Mutual Funds

mutual_fundsMutual funds are open-ended funds which are run by an investment company, with a specific investment goal in mind—value, growth, small cap, large cap, and so on. Fund managers buy and sell stocks, bonds, money market instruments within the funds, using money from investors.

Advantages: Diversification is the biggest benefit of choosing a mutual fund. Once you have decided what type of investment you want to make, the fund provides access to that type of investing by allocating your money among several different investments to minimize risk. Another advantage is that the fund has a professional money manager. The fund manager follows each company and makes necessary trades within the fund as necessary to try to boost fund performance.

Disadvantages: Typically, mutual funds have some fees associated with them and you may run into a minimum investment requirement.

3. Managed Futures

managed futuresManaged futures are similar to mutual funds in that they are directed by a professional money manager. Rather than being a fund of stock and bonds though, they are funds invested in commodities, currency, energy, agriculture, and government securities.

Advantages: Because of the investment vehicles, managed futures offer protection against losses in the stock market due to the negative correlation between asset groups. For instance, when the stock market takes a downturn, futures tend to do well; thus hedging your overall investment risk.

Disadvantages: Because managed futures offer only a partial hedge, only a small amount of one’s portfolio should be allocated to such an investment.

4. Real Estate

Real EstateWhether you are thinking about buying your own home, a vacation home, or a rental property, investing in real estate can be a wise choice. Typically, you can count on real estate to appreciate in value. Of course, this notion has become skewed over the last decade or so since the market has had to adjust to the “housing bubble.” To know if a property that you are looking at is a good value or not, take a look on websites like Zillow.com, to see what area homes are selling for, or the county auditor’s website in order to see what the tax-assessed value is.

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Advantages: When investing in real estate there are many tax advantages, including mortgage interest deduction. Investing in a vacation home (that can be rented out part of the year) or a rental unit can give current tax advantages, while steadily becoming an asset which can generate a steady income stream for you during retirement years.

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Disadvantages: Of course, being the homeowner entails the task of repairs and upkeep on a property. During the period of years in which you are paying a mortgage, you may not see much benefit besides the interest tax deduction; with that in mind, investing in real estate is more of a long-term investment.

5. Annuity

AnnuityAn annuity is an insurance product sold to investors who are looking for steady income during retirement. Annuities can either be fixed or variable. Fixed annuities guarantee a certain payment amount for the duration of the annuitized period. Variable annuities are tied to market return of investment, so the payment will be lower if the investment is down, but the potential for higher payments is available if the return is higher.

Advantages: Annuities guarantee a steady income stream for retirement and are relatively safe investments. Taxes are also deferred until retirement, so you should pay a lower percentage in overall taxes.

Disadvantages: Annuities are known to have high fees.

6. Certificate of Deposit (CD)

certificate-of-depositYou may not think of utilizing CDs as an investment strategy to get rich, however locking money into a certain rate for a certain period can ensure that your money grows at a steady rate for retirement and helps hedge against periods of lower rates of return on money markets or other interest-accruing accounts. The maturity period of a CD typically ranges from a few months to around five years.

Advantages: CDs are very safe investment vehicles; they protect the principle amount, while growing at a steady rate. Because terms for CDs are relatively short, investors have access to the funds without having to pay penalties to withdraw funds out of longer-term investments.

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Disadvantages: Even though CDs pay higher returns as compared to similar investments, they are typically low return investments.

7. Zero Coupon Bonds

zero_couponThis type of investment is a long term investment. With a zero coupon bond, an investor buys the bond at a deep discount and must hold the investment for a certain duration. During the time the bond is held, no interest is paid to the investor. At maturation, the investor gets back the initial investment amount plus the accredited interest.

Advantages: Zero coupon bonds allow for investors to invest a small amount of money, but have the assurance of knowing that their principle is safe and will grow over the years.

Disadvantages: Because it is a long term investment, you do not benefit from any interest accrued until the bond matures. An investor may have to pay taxes on the imputed interest in the year it is earned, even though they do not have access to it until maturation.

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