Doing Your Research Before You Invest

When it comes to building your household wealth, one of the easiest ways to grow your financial portfolio is to be able to invest frugally and generate a large return on your investment. While most people’s investments generate some sort of meaningful return, you could find yourself on the losing end of an investment if you buy into the wrong venture or buy-in at the wrong time. So here are some things to look at when you are considering a financial investment.

Retail Investing

A newer trend that is becoming more common are people who choose to forego using a money manager and buying stocks directly through a broker. This has become much easier now that there is much more public information on companies accessible to companies through websites, and that brokerages are now offering no fees to buy your own individual equities. Buying equities on your own refers to you as a retail investor, meaning you are independently taking on the risk of managing your own portfolio. While some money managers say this is an extremely risky endeavor, those who can properly do research on companies they invest in are capable of outperforming some of these big-name fund managers.

To be a retail investor, it is important to be very clear about what your goals are. If you are younger or willing to take on more risk, you should seek outgrowth or value stocks that can potentially yield great returns. However, some of these companies may not pan out and could go bankrupt, so be willing to look at balance sheets to gain confidence is a company’s ability to grow.

Alternatively, if you are looking for safer returns, consider dividend stocks. A dividend is a distribution of part of a company’s earnings to its shareholders. In order to receive a dividend, shares of a stock must be purchased no later than the last trading day before the ex dividend date.

Real Estate

The easiest investment strategy and one of the most proven successful ways to build a portfolio is to invest in real estate. While real estate doesn’t generate some of the best returns that you might get from investing in equities, you can set yourself up to receive substantial income by renting out properties that you own. There are many ways to build a real estate portfolio, whether its to flip homes or just rent out either residential or commercial real estate property.

One proven method to deliver the most consistent results is to invest in turnkey properties. These are properties that have already been flipped and may have a premium to purchase, but then all your capital should go straight to purchasing a home and renting out right away to bring in instant cash. Maintenance costs are low, so there should be little to no money going out of your pocket after your purchase. So, keep your eye out for turnkey properties in high demand markets for great renting opportunities.

Managed Equities

If you are looking for minimal effort and a good return, it is advisable to invest in mutual funds or index funds. Mutual funds are great because these are actively managed portfolios that always try to yield a better return on investments based on the short term movements of stock pricing. However, because these are actively managed portfolios, they tend to have a higher expense ratio. Make sure to do your research to ensure that your expense ratio will yield great returns. Ideally, you will want to see mutual funds yield at least eight to ten percent return.

Alternatively, you could also invest in an index fund, which is not actively managed, to mean you are simply buying into a balanced portfolio of stocks with not as much buying and selling activity. Because these funds are not being managed as aggressively, they generally have cheaper expense ratios, which means that it may be in your best interest to sell funds on your own. Depending on the index fund you are invested in, you can either generate flat returns or amazing returns.

So whether it is investing money into your own business, someone else’s business, or investing publicly in bonds or equities markets, do the research to make sure that your money is being put to good use and not losing out on your investment.

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