Types of Investment to invest in the new year.

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You hear it every day, to accumulate wealth, you need to invest! Your 9-5 job will not cut it nor is the bank of mom and dad. If you’re like most of us and do not have any type of inheritance, generational wealth or any of the other fancy terms for inheriting free money, investing may be your next best bet.

However, building the best investment portfolio can be a bit challenging especially since there are so many out there. If you’re a first-time investor, then it may be even more confusing to understand the different jargons that comes with the word itself.

But not to worry, this is what this article is about- 3 Types of Investments to invest in the year.

What exactly is investing?

Investing is the process of buying assets which increases in value overtime. Simple as that! However, it is important to note that at some point in time, you may want your asset to provide some type of return such as capital gains, dividends, interest etc. Investing can also mean investing time and money to develop or enrich your life or someone’s else life in the hopes that you will reap the benefits later on. Examples of these types of investments could be education, enrolling in a workshop or maybe swimming lessons.

In this article, our focus will be on Financial Investing which involves buying and selling of securities, real estate, gold, bonds etc to make a profit, capital gain or income through dividends. If you’re new to investing, you may be wondering how it is possible to invest to make money. Well it is similar to a business concept- The investments are purchased at a low price and sell at a higher price.

For example, if you purchase a property, renovate it in a few years or there has been some major developments in the area which makes it more appealing such as a school or a mall, this could potentially appreciate the value of the property. When you are ready to sell, the listing price may be much higher than the price you originally purchased the property. And guess what Cha ching- capital gain. I’m sure that you’re heard the saying- buy low, sell high.

I’m going to provide you with 3 types of investments, I think that you should invest in the new year, however before doing so, I would encourage you to talk to your financial advisor before making the decision.

1. Index Funds– What are they and why should you invest in them? Well Index funds are a type of mutual funds or exchange traded funds which follow and track the return of a benchmark index and follow a passive style of investing. What this means is that it tends to maximize returns over a long time. A perfect example of an index fund is S&P 500 Index Funds. This index included 500 of the top companies in the U.S Stock Market. For more on Index Funds, I would suggest that you read a book called How to invest in Index Funds gives you a step by step blue print in how to multiply your wealth.

Pros of investing in an Index Funds

1. Easy to manage.
2. Low Expense
3. Tax efficient.
4. Low Risk
5. Diversification

Con of investing in an Index Funds

1. Lack of flexibility
2. Can’t outperform the market.
3. No choice in index composition

2. Dividend Stock Funds– Dividends stock funds are stocks which offer a dividend payout on a monthly, quarterly or annually basis. Dividends are a portion of the company profits that are paid out to shareholders as an enticement to keep their shares. This approach is situatable for those looking to supplement their income. However, it does not come without risks. If you’re interested in dividend investing, please read up on effective strategies for successful dividend investing.

Pros of investing in dividends stock funds

1. It provides a steady income stream.
2. Fluctuation in dividends is varied.
3. Investors tend to remain in the market long term.

Cons of Investing in dividends stock funds

1. The ceiling on dividend gains is lower than growth stocks.
2. Dividends can be discontinued at any time
3. Expected dividends may change due to Business growth.

3. REIT- Real estate Investment Trust– what are they and why should you invest in REIT. Real Estate Investment Trust is a company that pool together income-producing real estate across a range of property sector. REITs receives income from the properties that are own and distribute approximately 90% of profits to shareholders.

Pros of Investing in REITS

1. An excellent alternative to investing in a property.
2. Low correlation with other assets
3. Offers steady dividends.
4. Liquidity- easier to sell than a physical property.

Cons of Investing in REITS

1. Dividend tax burden if held in a non-registered account.
2. Interest rate affects the property value thus your investment.
3. Lack of control on the types of properties.

So there you have it- Three types of investment to invest in the new year. There may be many others to invest in and if you have any other suggestions, please feel free to leave it in the comment.

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