Benjamin Franklin once said, “if you would be wealthy, think of saving as well as getting.” In other words, as much as earning and making money is important, saving some on the side is also crucial. One way to save your money, without merely setting it aside in a bank, is to utilize it as an investment. Investment, in a few words can be defined as putting money in a share, property, project or other, while expecting a profit, or a larger sum in a few months or a few years. There are numerous reasons for why someone should invest their money. Those include increasing your money without you having to put much effort. Secondly, keeping money in a bank means that it might be spent eventually, but putting it in an investment helps you save up for the future. Thirdly, investing can make you part of something much larger, especially if you are investing in a large business or a stock for instance.
Below are some of the best ways to invest your hard-earned money, with their advantages and disadvantages.
Investing in real estate such as land or buildings can truly be beneficial. Some advantages include but are not limited to:
- Stable Income – One of the main reasons as to why people invest in real estate is the stable income. Every month the payment of rent creates a steady income that is hard to gain through other investments.
- Financial Security over the long run – Property is one of those items that are highly appreciated in value over time. In the long run, what you purchase for a low price now can double or at least increase in the forthcoming years.
- Exclusion of Tax – Investors are not subjected to tax as getting rent does not fall under a category for which tax must be accounted for. Also, the property itself may be granted a tax break if there is depreciation.
Real estate also has some disadvantages such as debt, increase in expenses especially from property maintenance, and loans and legal issues. When it comes to finding a loan for investing in property that will not be for you, requesting a loan could become very difficult since there are no guarantees over the success of such property. This then takes a considerable amount of time and energy.
Gas and Oil Investing
Gas and oil also have a plethora of advantages with minor disadvantages or risks. Some ways to invest gas and oil is through directly purchasing “oil futures”, which is a financial instrument that can be created and traded depending on the settlement date. Oil investing has many advantages that you need to be aware of, and another way to invest in oil is through purchasing oil as though it is a stock; that is called “commodity-based oil exchange-traded funds”. The advantages include:
- Tax Advantages – There are several tax advantages when it comes to gas and oil investing. This includes 100% deduction for the year of drilling costs. 100% deduction on net losses, 15% of gross income, and 100% of lease costs. Tax breaks help you win big when you file for a tax return as long as you find an adequate accountant.
- Profitability – With the right oil and gas company, huge returns could be attained as they generate millions of dollars each year.
- High ROI (Return of Investment) – With tax return, and the generation of money brought each year, little investment from your side could truly benefit you over the long run. In a matter of a year, the relatively small investment that you put could be doubled or even tripled. Although the green initiative is taking a stand, oil and gas companies are still generating large sums, therefore a calculated and well-perceived investment can be the way to go.
The main disadvantage of oil investing is the fluctuation of the market price of oil. There are situations that may occur nationally or internationally that are impossible to control and there are those who lose the entirety of their investment. However, that does not occur on a larger scale such as other types of investments.
Stock markets also have many benefits which include;
- Growing Economy – The economy is always growing which causes a growth and increase in sales. This also increases consumer demand and the stock company’s cash flow.
- Staying Ahead of Inflation – The return of investment in stock prices may not be hefty, though over the duration of a year it could be enough to keep you ahead of possible inflation in the market.
- Easy to Sell – Stocks in general are easy to sell, just like they are easy to buy. As long as you have a decent stock broker, your share can be sold in minutes.
Stock markets do however have some disadvantages as well, which include the fact that the entire investment could be lost if the stock falls. Another disadvantage is if the company does fall or go broke, the investors or stockholders are the last to get paid. There have been some circumstances in which the owner of the company resisted paying back the invested money. Stock increase and decrease every day, so it is essential to understand how and why they may do that.
Before making any decisions, fully comprehending any of the above is key. Investing in your knowledge itself about such topics is the first step in investing your money successfully. Ask others, search online, inquire from those who have experienced any of the above investments, and follow the oil, stock, and real estate markets to gain a full understanding of where you will be placing your money. After all, this is your hard-earned money that you would not want to misuse.