When it comes to growing your wealth, you have more than a handful of options. If you inquire how to grow your wealth, you might get a response back as simple as invest in the stock market. But the stock market is made up of many different investment vehicles. So which one do you choose?
Additionally, what if you are looking for opportunities outside of the stock market to grow your wealth? In this post, I highlight 7 different ways you can invest your money to grow your wealth. Find the one or ones that make sense for you and get started improving your finances.
7 Different Ways To Invest Your Money
#1. Stocks
The first option to invest your money and grow your wealth is by investing in stocks. Stocks are shares of companies that you invest in. In exchange for investing your money, you get to grow your wealth through appreciation of the stock, assuming the company is able to grow its business over time.
As an added bonus, some companies will pay you a portion of their profits quarterly, known as dividends. This income is in addition to the price appreciation of the stock itself.
However there are downsides to investing in stocks. First is available capital. You need a good amount of money to buy 25 or 100 shares of most companies. In addition to this is diversity. By only investing in one company, you increase your risk should the company fall.
Overall though, investing in stocks is a good option for growing your wealth.
#2. Mutual Funds
Sticking with the stock market, the next way to invest your money is with mutual funds. A mutual fund invests in many companies in one share of the mutual fund. In other words, if you were to buy a share of a mutual fund, you would own a percentage of a few hundred or thousand companies.
The benefit of this is that you are instantly diversified by owning many companies. Additionally, the price to start investing is lower as you can buy fractional shares.
What are the downsides to mutual funds? There are a lot out there so you have to do your research to figure out the best one for you. Also, as payment for allowing you to invest in multiple companies at once and handling all the paperwork, you pay a management fee.
This fee comes out of your investment and impacts your long term return. The lower the fee you pay, the more your money can compound and grow.
For many beginning investors, investing in mutual funds is a great option. Just be certain you pay attention to fees.
#3. Exchange Traded Funds
Next up is exchange traded funds. This investment is very similar to mutual funds except that ETFs tend to track indexes and therefore have a lower management fee. Another benefit to exchange traded funds over mutual funds is that with an ETF, you can trade throughout the day whereas with a mutual fund, any buy or sell occurs at the end of the trading day, regardless of when you made the trade.
Overall, exchange traded funds are a better option than mutual funds in terms a lower management fee.
#4. Binary Options
The final option to grow your wealth that relates to the stock market is binary options. In reality, there are standard options and puts you can invest in, but I am going to highlight binary options.
A binary option allows a trader to wager on where the market will be at a set date in the future. If they guess correctly, they earn a fixed sum of money. However if they guess incorrectly, they lose their investment.
There are various types of binary options to invest in and you can easily grow your wealth by investing in this manner. But there is a huge amount of risk too. Many people are lured in by the simplicity of these options but find out making money using them is much harder than it looks.
For most investors, any of the other options listed here are a smarter choice for growing your wealth.
#5. Real Estate
Investing in real estate is an excellent way to grow your wealth for the long term. For most investors, investing in real estate means buying properties and renting them out. The tenant’s monthly rent covers the mortgage and other fees of ownership.
The result is ownership in a property that you paid very little for out of pocket. While this is a great option, there are downsides.
First, you need to have a good amount of money sitting around in order to make the down payment. You also have to find profitable properties to invest in and there is a lot of work renting out the units. You can outsource some of the work, but not everything.
If real estate investing does interest you, but you lack the funds for a down payment, you could invest in real estate investment trusts (REITs). There are many stocks and ETFs that you can buy. The only difference is that with REITs you own commercial properties and not residential properties.
#6. Your Own Business
Another option to invest your money is to start your own business. In fact, for many wealthy people, this is the main avenue they took to become rich. In addition to the income from running a business, there are many tax breaks you can take advantage of to lower your income.
But, starting and running a successful business is not easy. Most fail within 5 years. And running a business is a lot of work. However if you are passionate about it and have a product or service that people need and are willing to pay for, this is a great option to grow your wealth.
#7. Angel Investing
Finally we have angel investing. This is where you invest your money into other people businesses. In exchange for investing your money, they give you a portion of the company or a cut of the profits.
The downside to this option is you need a large amount of money to invest in a business. Most businesses don’t need $5,000 but rather $50,000 or more. There are angel networks across the country though that can help out.
Instead of investing all $50,000 into a company, the network has a group of angel investors that pool their money together to total the $50,000.
While this sounds great, it doesn’t address the fact that you still need to identify companies that are worthy of your investment dollars. If the company goes under, odds are your investment is gone too.
Final Thoughts
There are 7 different ways to invest your money. A few of them were related to the stock market, but this is because the stock market is hands down the best option for the majority of people.
The other options are good too, but in many cases you need a large amount of money, time and interest to make them successful. With investing in the stock market, you can invest a small amount of money on a regular basis and see a nice return for years to come.
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