Creating Wealth 101
Creating wealth is a noble and desired objective shared by nearly every American without regard to race, creed, color, or any other demographic characteristic. This section is not designed to teach you how to select stocks and bonds. Instead, it is a general course which is designed to educate you about the skills you need to obtain and create your wealth.
First, let’s discuss a few issues that you need to be aware of when it comes to wealth creation. There are short term and long term periods. The investments that focus on making a quick return in a relatively short period could range from days to less than five years. Longterm investing includes investment vehicles such as stocks, bonds, real estate, or other investments that will appreciate and result in a long-term capital gain.
It’s also important to know how much of a risk you are willing to take. That will determine the type of investment you should select for your portfolio. Your level of risk can range from conservative, meaning minimal risk, all the way to a high risk, which means you will be aggressive in setting up your investments. The level of risk is tied to the amount of time you have in which to wait for a return on your investment. What is your capital, outlay? In other words, how much money are you willing to pour into the investment and what is the primary source? Is it your income savings? Inherited funds? It’s essential to know how much you can afford to invest knowing that there is a chance that you could lose it. The return on investment is the sum of income and appreciation made on an investment. The total return is expressed in dollars and should not be confused with the rate of return, which is expressed as a percentage. Please note that the total return can also be detrimental. For instance, if the investment loses value.
Now, there are many investment vehicles such as stocks, bonds, precious metals, cash equivalent investments, commodities, and real estate. Investing in stocks requires a long term horizon. Anything else is trading, and it’s tough to time the market and realize the desired return on investment. Bonds are conventional investment vehicles that are used to guard against the turbulent up and down nature of the stock market. This investment vehicle is often considered safer. However, the maturity takes a long time period, and an investor is typically locked into the investment. The returns are usually smaller than other forms of investments.
Real estate investing is primarily done in three forms, vacant land, residential properties, and commercial properties. Investors who focus on turning vacant land into marketable dwellings or business locations have generated significant profits. Residential property is the most popular type of investment for real estate developers. However, you must be aware of the market. In real estate, timing can either work for you or against you. Commercial property can be empty land zoned for commercial use or existing business or building. Its evaluation requires a more sophisticated method. Therefore, it’s better to enter this specialization carefully.
Finally, here are five ideas for you to implement in creating wealth. The first idea is to pay yourself first and not less than 10%. That way, you will be able to build the investment and the savings you need to create and fund your investment goals.
Two, you need to be able to find a place to invest your money that will yield a decidedly higher return.
Three, always seek wise counsel and experienced investors when deciding which investment vehicle to use.
Four, in determining that investment vehicle, make sure that you understand the pros and cons of any investment which may come your way. Educate yourself.
Five, never invest in vehicles that promise unrealistic returns. Often those who make these promises are merely interested in deceiving you.
This completes Creating Wealth 101. Now that you have the necessary information you need on how to start getting busy creating wealth and a lasting legacy for your family.