Personal Finance

5 Practical Long-term Investment Ideas That You Can Start Today

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Most of us know that investing is a good idea and know a few investment ideas but very few understand how to do it. There is a common stereotype that investment is for the rich but this is not true.

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There is room for everyone in investing and if done wisely and consistently, anyone can strike it rich. In this article, I delve into the various investment ideas one can go into with little money and grow their income over time.

One key thing that beginners fail to understand is that investment is a long-term approach and needs patience. Growing wealth requires time but it is achievable if done in a structured and strategic manner.

There are various investment approaches one can pursue but not all are suitable for everybody.

Things To Consider Before You Invest

1. Amount of money

2. Risk appetite

3. Potential returns

4. Investment period.

Amount of money is key when dealing with investment ideas that require a set amount of capital for a start. This means that you are ineligible if the amount of money available does not meet the minimum threshold.

Risk is also a key factor as it determines the amount of loss you are willing to take if the investment fails. If your risk appetite level is low, then it is advisable that you take on investments with a guaranteed rate of return.

Potential returns have a direct connection with the risk. Investment ideas with high risk offer the potential of high returns but could also result in high losses.

The same is the case with lower risk. However, for a starter and a small investor, it is advisable to take on investments with moderately low risk as the aim to grow your account size over time.

Finally, the investment period is key in understanding how long your funds will be tied before you can access them. Some of the investment options require a minimum time period before you can liquidate your investments.

You can read more in this article here which I found quite informative. Below is a breakdown of five investment ideas that you can partake with a small amount of money and make returns over time.

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Stock Market

The stock market is one of the most accessible markets globally. Also known as shares, the market involves acquiring part of a business with the expectation that the share value will grow over time and there will be dividends regularly.

Trading in shares requires one to have a brokerage account that allows access to the market. As a small money trader, the goal is to look for stocks that are cheaply valued but with the potential to grow in the future.

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This process though is not straightforward as it needs an in-depth market analysis of the business you are investing in. Most of the knowledge required is the nature of business the company is engaged in, leadership qualifications, and past performances.

This knowledge will not guarantee a successful investment but it increases the chances of making the right decision. If you get it correct, this could be a very rewarding venture and could earn you handsome returns over time.

Trading in stocks requires a lot of patience as it takes years or decades for the share price to appreciate. The brokers are also supposed to give regular advice pertaining to your investment.

This ensures you are always informed and in case of a change, you can make informed decisions in a timely manner.

Government Bonds

Governments offer some of the best and safest investment opportunities. This is because the chances of a government failing are very thin.

Occasionally, the government sells bonds to the public, who, in return, invest their money and receive it back at interest. The advantage of a government bond is that the returns are agreed in advance hence guaranteed.

As a small investor, this presents a chance to invest and grow your money in an almost risk-free environment. On the downside, the investment is limited to a fixed time duration hence your funds might not be available if you need them urgently.

Trading in government bonds also requires a lot of knowledge so as to understand when and how to buy them. Bonds are suitable for those investors who want to compound their money over time in a precise and predictable manner.

Pension Fund

Pension funds investment is a scheme created to ensure we have resources to sustain ourselves once we get to our retirement age.

Depending on the country, the retirement age differs but most countries have it at around the age of 60. Pension funds help us in investing our contributions.

The major advantage of a pension fund is that other entities take up the responsibility of investing for you. You are also able to access a tax waiver up to a certain amount thus getting a reduction of your tax burden.

It also ensures an easy and comfortable life after retirement. One important thing to take note of is that depending on the country, there might be limitations on how one can get access to their funds.

Some limitations are tied to age or attract heavy taxation if accessed before the set period. It is advisable to keep a close eye on how the fund manager is performing in terms of returns.

This will ensure that you are getting the best returns out of your investment. Pension contributions are not limited making them suitable for investors who may not have a lot of money.

Money Market Funds

Money markets funds offer a great opportunity for investment. They operate differently from other funds but usually accommodate all types of investors.

One aspect to note of these funds is they are highly rewarding and highly risky. This means that they can also result in high losses. The fund invests your money on various investment assets and offers returns on a regular basis.

They pay out interest consistently for example on a monthly basis.

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They also allow the investor access to their funds immediately if needed. This makes them favorable for those people who want to invest but in the short term.

On the downside, there is no guarantee of returns hence you should only invest what you are willing to lose as a general rule. This aspect means that they only favor high-risk investors.

By using this general rule, it ensures that you only take the risk that you can handle.

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Fixed deposits

Fixed deposit investment is one of the most secure forms of investment. It pertains fixing your money with a financial institution, mostly banks, for a specific period of time at an agreed rate.

By the time a customer is fixing their money, they have already agreed on the returns and time duration with the bank. This is done in form of a contract making it a safe option.

One of the key factors to note is that this is a time-bound investment. You can’t get your cash before the agreed duration is over and if you do, there is a cost to it.

The rate of return is relatively low compared to other forms of investment. Another downside is that most organizations usually have limits on the minimum amount one can fix.

This might limit one if you don’t have the minimum threshold. On a positive note, it is a safe investment and with a pre-determined income, it enables one to plan ahead.

These are just of the five investment vehicles that one can look at even if you have a small number of funds. They allow you to enjoy investment benefits give you an opportunity to grow your money over a period of time.

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