I hear people all the time say, “I am not an investor, I don’t know anything about investing, I don’t have time to invest.” My advice is: If you’re really not investing, then why not?
Investing will help you meet your financial goals. Not everyone can spend their time and resources growing their savings and/or investments for the long term.
It’s easy to do when you invest regularly and do it right.
I’ve seen a lot of people who have not created wealth themselves. But everyone has a talent.
As a financial adviser, I work with clients who have created wealth and have a strong investing background. Here are the best ways to invest money for a quick return.
Trades
There are two types of trades: SIP and SEP.
In SIP, you create a high-level risk and are on the lookout for a big payoff. In a SEP, the amount invested is set in advance. After a designated period, the amount you receive (minus your principal) will be paid out.
This is best done with mutual funds, where you can lock in the value of your investments in the market. However, if you have a pension or an insurance policy with a maturity date and need the money now, consider the former.
Before investing, check the expense ratio of your fund to avoid taking undue risks. Then, think of the risk-reward ratio and compare the returns to your risk.
SIP with SIP
SIP is an investment vehicle where you invest a lump sum amount that meets your cash flow needs and is invested consistently over time. The longer you lock-in, the higher the growth rate.
SIPs give you the flexibility to invest as per your needs and the liquidity you want. Even though a small investment can have large payouts, a small SIP amount is small enough to feel like a step toward wealth creation, not wealth preservation.
SEP with SEP
SEP is an investment vehicle where the amount invested is paid out to you monthly or quarterly. But you’re not required to invest any time at all. You can “top-up” or change your contributions anytime.
This is great for regular income.
Disadvantages of SEP
There’s no opportunity to accumulate wealth in a SEP. If you invest consistently for long periods, you can invest enough for your children to cover their education expenses or even fund their retirement.
It’s like a savings plan for your child.
On the other hand, you may have to invest over several years and start very small. It’s good to start as early as possible, but it’s also good to stop.
If you stop before the maturity of the SEP, the returns are permanently limited.
Risk appetite
Equity risk is the one you should invest in. However, don’t go crazy and invest all your money in one stock.
Avoid having too much equity exposure. This is like a business buying an insurance policy.
It’s great for companies with a long-term horizon to take on significant risks. For example, Infosys bought the insurance policy to take on risks and rewards.
Avoid investing in speculation. Real estate has a high level of risk. Sometimes, these projects don’t go well or turn out to be nightmares.
The decline in property values is a tax on investors. Therefore, you don’t want to invest too much of your money into any one asset. It’s the same with equity.
While all the above-mentioned ways to grow your wealth will allow you to sleep better at night, don’t make the mistake of living beyond your means. When I’m in doubt, my first thought is to ask myself whether I could earn that much money by investing.
If the answer is no, I stop investing.
Buying options
Option trading has become a popular means of investing in stocks over the years. While an individual investor can buy regular stocks or exchange-traded options, an option contract is usually associated with a stock.
An option contract consists of a put option and a call option.
However, to make a proper investment in the stock market, an investor should consider the following factors before buying an option contract.
- The maximum number of shares
- The maximum number of shares which can be sold or bought
- The maximum value which you can set for the contract
- The maximum return you can expect on this contract
The above factors are what an individual investor should take into consideration before buying an option contract.
Once you decide that it would be good to buy an option contract, the best way to do it is by going for an online option exchange. Since it is an online broker, the contract will get delivered to your email box.
This process makes it easier for you to execute the option contract whenever you wish to. Since the entire process is online, you do not need to get any paper to execute the option contract.
In the option trading business, every broker needs to have an online option trading system to connect with many investors securely and speedily.
Fundamental research
Investors who go for fundamental analysis have a lot to gain. These investors do not rely on the stock market to research them.
However, these investors still invest in stocks to increase their wealth. To do so, they first take a close look at a company’s financial performance and its fundamental strength.
Basically, a company’s financial statement gives investors detailed information regarding how much the firm makes in a year. This document also includes information regarding the asset size of the firm, revenues, and expenses.
The more the assets and revenues, the more profits the firm makes in a year. The report also indicates if the firm makes enough money to remain in business or not.
After doing the basic research, the fundamental investors can take the next step. They can compare this information with the changes made by a company in the past.
The fundamental investor then decides whether to buy the stock or not.
To do this, the investor should focus on several factors, such as the price and sales of the stock and the average earnings of the firm. In addition to this, the investor also needs to evaluate the firm’s growth and its fundamentals.
If the stock price and sales are at a good level, the fundamental investor should buy the stock. However, if the stock price and sales are below its average, the investor should hold off on buying the stock.
The reason for this is that the fundamental investor should focus on the company’s overall valuation and not the valuation of the stock alone.
Often, the investor will buy the stock to sell at a higher price. The investor has to realize that he is making a mistake by doing this. Instead, the investor should determine whether the company’s fundamentals are going to improve in the future.
An investor should check for any signs of decline in a company’s growth, and if this decline is likely to continue, the investor should hold off on buying the stock.
Normally, if the company’s fundamentals improve, the investor can start looking at a better value in the stock. The investor can then choose to sell the stock and enter the stock at a lower price.
The fundamental investor should also check for a continuous stream of positive earnings reports from the company. The fundamental investor should also research the company to determine whether any regulatory issues are surrounding the firm.
The more accurate the fundamental investor is in his research, the more profitable his stock trading will be.
