As a rule, after selling real estate, everyone is faced with the question of what to do next with the funds received. It is crucial to remember that in cases where annual inflation is rising, this implies that it is by this percentage that the savings that you keep at home have become less expensive. It is essential to make them work in order to avoid losing money. Begin to invest, for instance.
You can participate in any of the following assets: shares, bonds, bank deposits, or some alternative options. Let’s figure out how each of them operates, what advantages may be obtained, and where it is worthwhile to invest.
Alternative investments
Alternative investments are non-traditional assets for sophisticated individuals looking to diversify their holdings while earning more than the industry median. What is it?
Crowdinvesting
Crowdinvesting is a group investment. In this scenario, you and other individuals can invest in a private company in return for a stake in the business or give such a company a loan at a high-interest rate.
When purchasing a share, if the project has taken off, investors can earn much more than on the stock market, but the risk of such investments is much higher since investments in small companies are not as reliable as investments in large public companies.
Cryptocurrency
Cryptocurrency is an asset with high volatility and a completely incomprehensible intrinsic value that cannot be reliably estimated. This means that its prices can change very quickly and in any direction, and no one knows which price is fair.
You can purchase currency through crypto exchanges, p2p platforms, exchangers, and wallets. In this case, it is also essential to clarify whether the systems take any commissions. You can store funds in special wallets. According to Buidlbee.com, Bitcoin and Ethereum can still outperform most major assets this year, so maybe it is the perfect time to invest.
And here are some more traditional ways of investing
Bank deposits
One of the most common conservative sources of earnings is to deposit money in a bank and earn interest on it. Nevertheless, even the usual deposits have their own subtleties.
- Conclude a fixed–term contract
From a month to a year, you will be able to store funds in the bank. In case you do not wish to lose a portion of your profit, withdraw cash once the storing term has expired. In some situations, banks make it possible to withdraw cash in part without losing interest.
- Deposit funds on demand
In this case, you can withdraw money at any time, both partially and completely, but because of this, the interest rate on such a deposit is usually lower than on an urgent one. If you want to withdraw some of the funds, interest will continue to accrue on the balance.
- Store money with capitalization
The bank does not transfer the accrued interest to a separate account but adds it to the original amount. As a result, in the next period, you will be charged interest on a large amount.
Bonds
This sort of passive revenue functions in the same way as fixed-income deposits do. In this situation, the company or the government takes a loan from you using bonds. You can get interest on your loan in the form of vouchers that corporations pay out once quarterly or every six months. The terms of the bond are usually discussed in advance and rely on how long the firm borrows funds, at what percentage, and how frequently it pays it back.
The bonds can be sold at any moment, even before the agreed-upon date. However, at market prices, this may alter. It’s also possible to win based on the disparity between buying and selling.
Stocks
In this case, you buy a stake in the company and become its co-founder. There are two ways to make a profit.
- At the expense of dividends
The corporation allocates a portion of its profits to its stockholders once per year (often more frequently). To produce continuous revenue, you must invest in long-term firms that pay dividends on a constant schedule. Take into account the oil and gas, finance, utilities, telecommunications, and retail industries.
- Due to constant stock trading (trading)
In this example, the trader is attempting to acquire shares at a lower cost and sell them at a higher cost. Nevertheless, while it may appear straightforward at first look, more than 90% of rookie investors lose a lot of money.
The value of shares is constantly changing, so this method is riskier than just receiving dividends.
Conclusion
If your goal is long-term capital growth and regular income, then it is best to choose stocks and commercial real estate. If you want to insure yourself as much as possible and get a low, but very stable income – bonds and residential real estate.
Investing in real estate, especially in commercial (a more profitable, but more complex option), you should not blindly trust the promises of brokers or developers. It is important to thoroughly study the selected object in order to understand all possible risks. The most reliable option would be to put everything in the hands of professionals.
Do not hesitate to ask questions. Start investing with a small amount and increase the check only after positive results. An experienced investor always goes into any transaction carefully, having maximum information and understanding all the risks.