jueves, 17 de noviembre de 2011

3 Best Ways To Invest Your Money - Getting Outstanding Returns

The point of investment is to get a return on your capital within a given time frame. The shorter the time frame, the bigger the return, the bigger your compounding result will be each year. Investors focus on getting the biggest possible compounder each year with the least possible risk.

This factor risk defines the quality of an investment. A quality investment is of course an investment where you actually get back your seed capital as well as a percentage margin on top of that capital. So the best ways to invest money are ones where your risk is very low or nill.

There is no such thing as a nill risk investment, there is always some risk. Even the investment of putting your money in a bank has at least some small element of risk involved. This is considered by most investors as the safest investment of all because a bank is a certain kind of business that is actually backed and guaranteed by the government.

So a bank deposit is the best way to invest your money, if you have several million dollars. The single digit return makes it impractical as a source of passive income for investors with less than at least a million dollars because the returns are too small to live on. But for large capital accounts it is still the safest place to park money.

The next safest investment is real estate because unlike the stock market or mutual funds, your money leaves your hands but you receive something of tangible worth in exchange. This is a very significant thing, because if you compare it to the stock market, you receive nothing more than a receipt for an investment in shares. This receipt is an acknowledgment but it has no intrinsic value in and of itself. The actual paper document you receive has no value.

What this means is that the risk is out of your hands to control. You have passed on the money to someone else and the capacity to control risk is completely absent. Control and risk are very closely connected, so when that control is relinquished, then so the risk factor increases significantly.

The final best way to invest money is a variation on real estate, however it can be used even with small capital accounts. The entry costs of real estate are large, you need a deposit, you have legal costs and other associated expenses. However, you may also invest into investment objects that match your current level of seed capital. For example, you could quite easily buy common goods that are mis priced and sell them at a profit. This sort of transaction can happen as quickly as a week and the return can be quite high. This capacity to rapidly turn over an investment has powerful ramifications on a port folio. If you can buy something for $100 and sell it for $140 that is a 40% mark up, if you can do that in a week, you have quite an investment model if you can maintain those levels of compounding. $100 turns into a million dollars in only 28 such transaction.

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