A Beginner’s Guide to Popular Investments for Any Investor
Don’t know the difference between mutual funds and dividends? We’ve got you covered.
With financial uncertainty at an all-time high, making your money work for you should become a priority.
While it might seem like tightly grabbing everything you own and holding on to it might be the best option, it’s actually not.
It might sound counterintuitive, but investing your money allows it to go further. I know the word investing can immediately turn some people away…
“But I don’t know anything about the stock market.”
“I don’t have thousands of dollars to spare.”
The good news is that there are many forms of investing out there, and not all of them require you to know a bull market from a bear market. There is really something for everyone.
For risk-takers, there are volatile high-return investments that have a lot of earning potential. For those looking to add to their nest egg, there are steady, hands-off investments.
The goal of this article is to present many different types of investments for all types of people. No promises of becoming an overnight trading sensation or 10 secrets to wealth.
However, all of these investments have the power to take what you have and grow it. This is the definition of investing. How much risk you’re willing to take will be up to you.
To help you decide which investment is right for you, we’ll analyze each tried and tested type of investment, discussing what you need to get started, the potential returns, and the risks.
Content Sites
Content sites are an enticing opportunity that many people might not have heard of but can be an incredibly powerful investment.
Content sites are websites that are monetized through advertising and/or affiliate marketing. Affiliate marketing is where companies allow you to promote their products, and every time you send someone to buy a product through your affiliate link, you earn a commission.
If you’ve ever Googled a review of a product or looked at a how-to style article, chances are that you’ve visited a content site. These websites are all over the internet because they can be highly profitable and can be run with a few hours of work a week.
Entry point: The cost of buying a content site can vary greatly. Sites that are priced in the thousands will generally require more work be put into them. For the technical investor, this might be appealing, as the opportunity to scale the site is higher.
For the non-technical investor, though, or someone who has more capital to spare, buying a content site in the tens of thousands and above can become a more hands-off investment. At this price range, you can afford to have freelancers on hand to do most of the especially time-consuming tasks.
Where to purchase content sites: There’s a very active market for buying and selling websites, but it’s best to work with a broker if you’re not experienced. A broker will vet websites to make sure you’re only viewing legitimate sites that are already turning over a profit.
If the idea of owning a content site interests you, then register for a free account on the Empire Flippers marketplace.
Return: A content site has the ability to be a very high-return investment. It’s not uncommon to see buyers double or triple their monthly profit in a short period of time.
If you only maintained earnings, you could expect to get a full return on investment (ROI) in two to three years. However, the beauty of a website is that its earnings are highly scalable. Improving the site could see your ROI shorten to just a single year.
Risk: As with any high-return investment, there is increased risk. Websites can be a volatile investment, as you’re often at the mercy of Google when it comes to driving traffic to your site. This and the competitive nature are major risk factors to carefully consider.
Performing thorough due diligence before buying an asset of this kind is paramount to its success.
Dividend Stocks and Funds
Dividend stocks give people the opportunity to invest in companies and earn payouts, known as dividends.
Dividends are typically offered by established and stable companies, which makes them a more reliable investment than traditional growth stocks. They can also be a source of regular income, with typically quarterly payouts.
Dividend funds give you the ability to buy shares of dividends from multiple companies with one purchase. Diversification like this is considered a good investing practice.
Entry point: There’s a low barrier to entry with dividends, as they can be acquired with little start-up capital. They are longer-term investments but represent a great opportunity for someone looking to stow away a bit of extra money and earn in the process.
Where to purchase dividend stocks: Most online stock brokers offer dividend stocks.
Return: The expected return of a dividend can be viewed before you invest. This is called the dividend yield. A yield of 4% is considered a safe investment; when it starts to go above this percentage, more risk is incurred.
Risk: Sticking to the above yield rate will ensure that you’re investing in companies that are likely to remain stable, but there is no definitive guarantee. Investing in multiple dividend stocks or using a dividend fund is one way to mitigate this risk. Overall, dividends are considered a lower-risk investment.
REITs
Real estate investment trusts (REITs) are trusts that own a portfolio of properties and pay you dividends on their income.
This income is collected through rent payments from tenants. The properties could be residential, such as apartments, or commercial, such as shopping malls.
Entry point: The minimum buy-in for a REIT will vary depending on the trust in question. You could be looking at $1,000 or up to as much as $25,000 for private REITs. When you compare this to the traditional cost of real estate, it’s still an attractive investment that most people should consider.
Where to purchase REITs: REITs can usually be accessed through online stockbrokers.
Return: The return of REITs varies depending on the trust. An average of 10% ROI is fair, but it’s important to analyze the return history of each trust. This makes REITs a fairly high-yield for a hands-off investment.
Risk: The market for REITs is illiquid, so it can be difficult to exit once you’ve bought in. Some trusts will also have a minimum duration for which you need to remain invested. Additionally, there are fees associated with REITS, so make sure to do your due diligence before investing.
Mutual Funds
Mutual funds collate money from multiple investors and invest it in a portfolio of stock, bonds, and other assets.
Every mutual fund will have its own set of objectives, which you can use to match your own investment criteria.
Mutual funds offer diversification over multiple investment types and are generally managed by an investment manager. This helps to make them a hands-off investment and often includes hundreds of different stocks, something that wouldn’t typically be feasible for the average investor.
Entry point: The cost of entry can range from a few hundred dollars all the way up to millions of dollars, depending on the estimated return. Mutual funds need to be managed by experienced investors, which comes at a cost. There are often fees for buying and selling, as well as ongoing fees that come out of returns.
Where to purchase mutual funds: Most online stock brokers offer these investment opportunities, as do the finance companies that manage mutual funds.
Return: It’s hard to pin down an average return because there’s so much variance between the available mutual funds. If you take the S&P Index Fund, which invests solely in the S&P Index, it has an average annual return of 10% historically.
Risk: Most mutual funds are considered fairly low-risk because of the extent to which they are diversified.
How to Choose the Right Investment
Building a diverse investment portfolio rather than putting all your eggs in one basket is the best way to invest. Of course, this will require more money, but even with a relatively small budget, you can still create a portfolio.
Before deciding which investments to make, you should establish some clear goals. Four questions you should ask yourself are the following:
- How much capital do you have to invest?
- For how long can this money be invested?
- How involved do you want to be?
- What’s your tolerance for risk versus reward?
From this, you can begin to establish how you want to structure your investment portfolio.
A moderate return portfolio could be structured as follows:
High-return investments (index stocks/content sites): 30%
A collection of funds, bonds, or dividend stocks: 70%
Depending on your risk tolerance, you can change these percentages as you wish. A younger investor might want to be more aggressive since they have time to make up for any losses.
As with all investing, the golden rule is to never invest more than you’re willing to lose. This is particularly true of high-risk, high-reward investments.
For more risk-averse investors, there are still plenty of low-risk options out there, such as dividend stocks.
Now it’s your turn to build your very own portfolio of investments.
