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Is It Better to Save or Invest Your Money?

When building wealth, it is important to understand the similarities and differences between saving and investing your money. Knowing when to save and when to invest your money is a key part of your wealth building plan.

Let’s start from the top. Basically, saving money is putting money aside on a regular basis. You spend less money than you earn and put the rest in a savings account at your bank. This should be an automatic part of your monthly budget. Remember, saving money is an important part of being financially successful.

Investing is taking this a step further, and putting money into the stock market by buying stocks, bonds, mutual funds, or other investment vehicles. Investing is absolutely imperative in building long-term wealth.

What Is Investing?

Once you have a good amount saved, you can begin investing money. Investing is the way that you will begin to really grow your money and begin to build wealth. For example, if you keep your savings in a savings account, the amount of interest you will earn will be very small. However, if you invest in mutual funds or stocks, your rate of return will be much higher.

The big difference? The stock market fluctuates, and it’s never a sure thing that you’ll earn money. In fact, you can lose money in the stock market, so be sure to keep that in mind when investing.

You will eventually come to the point where your investments make more than you are contributing each month. Your wealth really begins to grow at that point.

What Should I Invest In?

When you begin to build wealth, it is important to spread your risk. Mutual funds are an easy way to diversify your portfolio. These funds are spread out over many different stocks so that if one company fails, you do not lose everything. Another good idea? You should have your money invested in more than one mutual fund. You don’t need to have 20 mutual funds, but three or four is a good start.

If you feel confident with investing in individual stocks, be sure that you spread your investments over a wide variety of companies, businesses, and sectors of the market (For example, do not invest all your money in tech.) It is not enough to invest in different companies if they all in the same industry because sometimes entire industries can take a hit.

You may consider investing in other things. One example is real estate. This can bring you a good passive source of income. Real estate also tends to increase in value over time. However, do not do this until you are ready to purchase in cash, and can pay for any repairs or unexpected expenses out of cash flow. It also may require more work on your part, depending on how you choose to rent it out and whether or not you use a property management company, which can cut into your rental property earnings.

Real estate can be a great investment, but it also has its risks. Much like the stock market, property values can go up and down.

When Should I Start Investing?

Most financial advisers recommend that you wait to start investing until you have paid off the majority of your debt. However, this really depends on your interest rate. If you are paying a 0% interest rate on your debt, it may make more sense to begin investing before it’s paid off, since you can earn a greater percentage in returns. (The average rate of return on the stock market is around 7%.)

It’s also a good idea to have a solid emergency fund saved before you begin investing. You should have money in your emergency fund that relatively liquid and easily accessible, without paying a large penalty. A money market account at your bank is a safe place to put this.

Investing can help you build wealth. But keep in mind that you won’t be able to truly build wealth – and increase your net worth – until you spend less than you earn and get out of debt. That’s why it’s still wise to stick to a budget, so you can save and invest effectively.

Who Can Help Me Start Investing?

So you’re ready to invest, but you’re not quite sure where to start. A good first step is to meet with a financial advisor.

A financial adviser can explain the different types of investments that are available to you. He or she can explain the risks and the potential gains to help you find investments that you are comfortable with.

Another option is to select an online brokerage site or robo-investor. The fees are lower and if you know the types of investments you want to make, you can save money in the long run.

One final thing to keep in mind: Investing is a long-term strategy for building wealth. It’s important to be patient, and ride out the times when the market is not doing well. Once you do this, then you can truly be on your way to building net worth.

Original – BY MIRIAM CALDWELL

The Flexibility And Strengths Of Real Estate Investment

There are many different ways to invest your money and improve your financial well being. Modern technology has made access to investment tools easier than ever no matter if it’s your bank or money market account the ability to engage with your investment activity and funds is easier than ever. However, investing is a broad term that can mean a lot of different things to a lot of different people.

When you talk about an investment it can be a money market account, high-interest savings, an IRA, real estate, and more. For many people investing in real estate remains a long-standing and popular way to invest your funds and turn a profit. An advantage real estate has over other methods of investment is its a real tangible object that is in a physical location making it something easier to conceptualize and personally manage.

Real estate is also flexible and can be something as simple as an apartment complex to high-end real estate in Monaco. As a financial investment real estate requires careful research before you buy any piece of property to see if it fits your investment profile. Here are some general advantages real estate offers as an investment and advice to see if real estate investing is right for you.

The Strengths Of Real Estate Investment

  • Stability: real estate, in general, is more stable than the stock market. The stock market represents multinational corporations that are worldwide and as such are easily affected by a variety of international events. While real estate can certainly be impacted by outside events but in most cases, these are more localized.
  • Return On Investment: when well maintained and managed real estate offers a consistent income flow. While real estate’s earnings aren’t as high as the stock market they are more predictable and easier to directly impact through direct involvement such as property improvement and hiring outside management companies.
  • A Growing Investment: many properties appreciate in value resulting in their listed value increasing over time. This means that money can also be made by selling the property if ownership becomes infeasible in the future.
  • Tax Savings: an investment is meant to make money and real estate investments can generate income by reducing costs via tax write-offs. These tax incentives include depreciation, interest incurred on mortgages, and more.

Ways To Invest In Real Estate

Real estate is a far more versatile investment than you may first assume. While rental properties are the first thing that comes to mind when you think of making money off of real estate there are several ways to make use of it as an investment opportunity.

  • As Rental Properties: the most well-known form of property investment renting out property has been an investment strategy for centuries. It allows a hands-on approach and several companies are willing to assist with management, maintenance, and repairs if needed.
  • Real Estate Limited Partnerships: not everyone can be a sole property owner as there are several barriers to entry such as capital and time. In a real estate limited partnership, you are a limited partner buying a share of a property portfolio which is managed by a larger company that serves as the primary partner and property manager. Income is made through distributions and later on when the property itself is sold.
  • Property Flipping: another popular form of real estate investing is flipping property. This type of investment is short term, not lasting more than a few months, and it tends to take two forms. The first type buys an undervalued property in an area with appreciating property values and flips it to turn a profit in response to market forces. The second type renovates the property, makes improvements, increases its value, and then sells it for a profit exceeding the upfront costs.
  • REITs (Real Estate Investment Trust): a REIT is traded on the stock market like any other stock and represents an investment in a property portfolio. REITs pay out dividends like other stocks and offer the unique opportunity to invest in properties that have a high barrier to entry such as malls, office buildings, other commercial properties, healthcare facilities, and others.

Final Thoughts

As the above information shows real estate investment is a sound strategy that should be a part of your investment strategy. It is a flexible investment that offers many ways to use your money and if traditional rental property management doesn’t fit your goals there are several other options to consider. With proper research, your real estate investments can turn a stable predictable profit for many years.

Original – NuWire