If a person has free money, then the question arises, how to dispose of it in order to get additional profit. After all, only having embarked on their investment, he forever gets rid of the stable and widespread phrase “extra money”. The investor does not have such a concept. Each penny generates income, and the financial situation will depend on where to invest it.
A feature of the domestic financial market is its unpredictability and misunderstanding on the part of people who do not have special training. If abroad it is customary to buy stocks, securities, then our choice is small. At best, compatriots prefer to take the money to the bank, and most often – buy green bills that are so understandable and pleasant to the touch and put them in a secluded place.
You can understand them, because from 2008 to 2020, the dollar rose from 5 to 28 hryvnia. And it would be half the trouble if this happened gradually. But in reality, there were two sharp collapses, which caused many citizens to think about what if this happens again.
Some of our compatriots have significant incomes, which gradually accumulate, amounting to certain savings. Others, on the contrary, do not have their own money and torment themselves with thoughts of how to become rich. To read some of the recommendations and tips outlined in this article will be useful to both.
How to identify some of the concepts associated with investing
You should start with the concept of “free money.” This is such a resource, having lost which, the investor remains “at his own”, but he does not have any obligations to third parties, be it banks, pawnshops or acquaintances. To take money on credit , to withdraw from an existing business, to sell real estate for the sake of investing – things are very risky and most often unjustified.
In Ukraine, the economic situation is extremely unstable. If the business that a person plans to do is profitable today, then in a year it can become unprofitable. Do not neglect the fact that an attractive idea will attract other people. Competition will arise in the area of interest, the stronger players will ruthlessly supplant the weak, which will be expected to complete ruin.
A future investor should know what regular income is. If a person has money, he will be able to invest it in the business. However, having no income, you should not even dream about investments. An idea may turn out to be a losing one, as a result of which there is a risk of being left completely without a livelihood.
Experienced economists and experts advise you not to take any steps without making investment plans. Such an approach is justified by experience and probability theory, according to which at least one of the selected areas will be successful and profit. However, in this case, it is necessary to develop algorithms in advance that would provide possible actions in case of problems.
The resulting income is not worth spending, it will become much more reasonable to form a new investment portfolio. Thus, the profit will increase and will bring in the future another source of income. The factor of fraud and outright lawlessness must also be considered. It is possible that an inexperienced investor will be offered at first glance a wonderful idea, and he will not notice a catch in it. It is also possible that a successful company can simply be selected. It so happened in Ukraine that it is much more profitable to raider and take out a ready-made business than to develop your own business. In other words, the investor must think through everything in advance, although this is quite complicated.
If a person trusted a broker, he should definitely be interested in cash flow. Unfortunately, no one can trust now, therefore the control will reduce possible risks, minimizing them.
What are the principles of investing
Any investment should be long-term. It is impossible to invest today , and reap the benefits tomorrow. Situational changes in the market should not lead astray; therefore, a balanced approach is especially important in investing. Do not think about the business of an emotionally unstable person. After all, if the value of the shares sways a little down, he may get rid of them in a panic, although in six years they will increase in price at times. The effectiveness of investment is judged after years, and not after a month or a year.
Before investing, you should critically analyze your own knowledge and willingness to develop a direction. If a person is not interested in it, he will not engage in the business himself, but will entrust it to other persons. It is possible that among them will be the most ordinary scammers. They will squeeze out everything that is possible from the case and leave the company to the mercy of fate. The ability to stop in time will also be useful. If the business is not profitable, investing in it unlimited money may not make any sense. A reasonable decision would be to take a break and switch to a direction that is guaranteed to be profitable.
When making a decision, you should never be guided by emotions. This is an extremely unreliable adviser. It is much more sensible to cool down and think over the proposal in a calm state. Only then will a person be able to make an objective decision when he has time and scrolls through the situation again.
Investing your money is in the undisputed market leaders. If the company has proven itself unsuccessful, there is no point in hoping for a miracle. From unprofitable enterprises, international concerns grow only in the cinema. Such a course of affairs is more like a fantasy, which in modern realities has no place. If a novice investor gets the first results, he should not immediately withdraw the profit from the case. It is much wiser to think about how to manage money and where to invest it.
What advice do investment experts give?
Experienced experts are always willing to share tips with novice investors. They are especially valuable in that they reflect the view from the side. A person blinded by his idea may not notice obvious things, which is only feasible to an uninterested person. Here are some recommendations from financiers:
- All risks should be minimized. According to statistics, a third of savings goes to those industries that carry 100 percent profit. Their list includes opening deposit accounts, investing in real estate and buying precious metals.
- It is necessary to provide a constant passive income. To do this, invest in securities, stocks and bonds.
- Each investor must diversify the portfolio. Then he will be able to insure himself against bankruptcy. All areas of activity will not become profitable, but all of them will also not turn into unprofitable.
- Some areas promise huge profits, but at the same time they contain significant risks. In no case should you leave relevant only them. In the hope of getting rich quick, you can lose. Then the damage will be fatal.
- All information obtained from any sources should be carefully checked. Where business is involved, there is no place for trust.
What are the main types of investments and their classification
All investments are usually divided into types. Having understood each of them, any person will be able to make decisions more confidently. Depending on the objects to which the investments are directed, there are:
- Speculative investment. They are designed for subsequent resale, therefore, represent a temporary investment of money.
- Financial investment. These are securities that generate profit from the results of companies.
- Venture capital investments. For many compatriots, this is a rather incomprehensible direction. It is associated with investments in new technologies that will bring income only in the future.
- Real investment. They involve investing in real estate, works of art, precious metals and products from them.
If we talk about the terms, it is reasonable to distinguish short-term, medium-term and long-term investments. Short-term investments include those calculated up to a year. Medium-term is designed for five years, and long-term – for a longer period.
Investments are also shared by their sources. A private or legal entity can invest. If the investor is a company owned by the state, they are called public investment.
For associated risks, any investment can be defined as conservative or aggressive. The intermediate link is a moderate-risk investment. It should be remembered that aggressive investments bring the largest income, but relying on success can be less likely than choosing conservative investments.
An example of an aggressive investor is the legendary personality George Soros. He knew how to invest and not make mistakes. He, of course, is an example to follow, but do not forget that his success is comparable to winning the national lottery. According to the calculations of leading experts, the chances of success for Soros were determined as 1: 473 000 000. It is not worth hoping that fate will be as favorable to the investor as to Soros. Therefore, it is wiser to opt for conservative investment options.
According to the objectives, investments are divided into direct, intellectual and non-financial options. Intelligent investments are the development of start-ups, know-how and the latest technologies. They are almost the same as venture capital investments, calculated for the long term and do not bring immediate profit.
Non-financial investment is a contribution to your own education. The main thing here is a critical assessment of one’s own abilities. If a person is sure that he will certainly justify them, one should act decisively, without the slightest hesitation. It is worthwhile to realize that such investments will be a win-win. The knowledge and acquired skills will remain with the person for life. He has only to develop and update them.
The advantages of private investment and their disadvantages
Any investment is associated with certain advantages and at the same time disadvantages. The benefits include:
- the opportunity to expand your horizons;
- obtaining additional income, which may exceed the main;
- renewable resources and maintaining profitability.
In this case, it is necessary to evaluate the disadvantages of investing:
- lack of any guarantees of a successful course of affairs;
- the presence of significant capital loss risks;
- requirements for the investor’s personal qualities (it is contraindicated for people who are not stress tolerant).
Several ways to invest in domestic realities
Today in Ukraine you can earn, even without huge capital, in several ways. Let us dwell on each of them.
- Opening a bank deposit. Although inflation and the size of bank rates are almost at the same level, this is the most secure type of investment. The state in one way or another guarantees the reimbursement of deposits, so the risks are minimized.
- Contributions to investment funds. This is a risky event in which the risks of losing profit are 50:50. The broker will manage the funds, however, even the most experienced specialist is not safe from losses, especially under the current difficult business conditions.
- Buying a property. This is a 100% option for a profitable investment. Despite situational fluctuations, over the years, every square meter can make a profit. Now the peak of falling prices, which can be used well in the long run.
- Buying precious metals or products from them in the same way as real estate will certainly come true in the future. For short-term investments, this option is not suitable, since the difference between buying and selling will reduce the possible profit to zero. It is possible that some money may be lost.
- Own business. This means to earn only self-confident people. You can try to invest in another person’s business. However, as practice shows, usually such projects are doomed to failure. In the event of a successful course of business, the business partner will certainly want to get rid of his partner, and if the idea burns out, it is possible that you will have to compensate for losses from your own pocket.
- Acquisition of securities. Much depends on the broker. If he helps to manage finances, then it is quite realistic to count on earning income.
- Private lending. It is possible that an unscrupulous borrower may be caught. There are practically no options to recover money, and a lawsuit can last for years.
- Foreign currency purchase. On the one hand, this is an option for earning, and on the other, the currency depreciates over time, although not as much as the hryvnia.
- The acquisition of art. Such investments can be made only by those who have considerable money and at the same time professionally versed in that kind of art, whose works they collect for further sales. The amateur can be imposed on a usual fake, on which he burns.
- Internet project. Investing in it is tempting, but risky. A high risk of encountering scammers eliminates all forecasts of possible investment returns.
- Binary options Profits are fast, but you need to have excellent intuition and be able to make predictions.
- Investing in your own education. Actual for people who not only have abilities and talents, but also iron willpower. Spend money on training, and then cool down and stop cultivating – it is a waste of money.
How to invest in real estate
As with any type of investment, such investments have advantages and weaknesses. Among the indisputable advantages are reliable safety of funds and guaranteed profit when reselling an object in a few years. At the same time, residential real estate can be rented daily, which will bring quite an impressive income. If we talk about the shortcomings, they should include the additional costs of maintaining the facilities. In any case, they will have to be repaired and operating costs incurred. If you do not rent them out, you may incur losses.
All real estate is divided into commercial, residential, land, as well as objects under construction. If the residential is more or less clear, then those who understand the nuances of the modern market can invest in commercial or under construction objects.
To rent real estate is a common practice and abroad. The one who managed to purchase the property at the peak of falling prices and then expensively leased it for a long time invested profitably. After a certain period, when prices begin to rise, you can resell the apartment or house, while earning a fortune. It is possible that the difference will be 100 percent or more. Many real estate companies are engaged in such activities. But in order to provide yourself with a good income, you need to have an impressive starting capital.
People who are familiar with construction can profitably purchase unfinished objects. Many owners in times of crisis are experiencing financial difficulties and it is not possible for them to overpower development. They are ready to concede in price in order to only return the invested funds. There are times when construction started can be purchased at the price of a regular land plot.
The buyer acquires such an object and continues to develop, investing his money. If he has a proven and reliable construction team, he can quite successfully sell a turnkey ready house. It all depends on the contractor who will complete the construction. If the work is carried out without disruption of the expected timelines, while qualitatively and reliably, then with this investment it will be possible to earn up to 50%. Much will depend on the project. It is possible that it will have to be redone at the discretion of the new owner of the object.
To invest or not: that is the question
When investing, many make mistakes. They can be both objective and subjective. The main thing is not to allow yourself to spend profitlessly in the first stages of such activity. Often you have to deal with an irrational attitude to money.
A person who has income sometimes acts rashly. He takes a loan and proceeds to acquire such things that he had dreamed of all his life. These are expensive cars, houses by the sea, as well as fascinating foreign tours. He becomes so confident in the profitability of his business that he ceases to notice potential dangers. When his activities encounter difficulties, he has to return money that he is unable to earn.
Any investment has its own individual characteristics. Starting to invest money, a person can only rely on himself and his strength. Do not forget that there are exceptions to any rules. Sometimes those investments are profitable, from which all experts dissuaded with one voice. A win-win investment faced with concepts such as force majeure.
If a person does not feel confident in choosing a method of investing money, the most reasonable decision will be to open a deposit and preferably in a state bank. He will know how much money he can have each month. If you analyze the situation in the domestic market, Privatbank will be the best choice. This is a public financial institution that offers flexible and favorable conditions for depositing. Today it is 14.5% per annum when placing a deposit in UAH for six months. In this case, the deposit can be replenished, renewed, as well as capitalize profits by adding it to the amount of the deposit.
Good conditions are also offered by Oschadbank. This is 12.5% when placing a deposit for a year. It should be borne in mind that the most reliable banks are organizations with foreign capital. The probability of their bankruptcy is extremely low. But they offer the most modest interest on deposits. These include OTP, Kredobank, Credit Agricole, as well as Raiffeisen Bank.
Making money on investments is a real art. It is possible and necessary to be guided by generally accepted rules. But if we are talking about dizzying revenues, you will have to take quite significant risks. Deciding whether it is worth it or not is a personal matter for everyone.