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Monday, August 7, 2017

6 Popular Passive Investments to Build Wealth and Financial Security

This post is written by Nancy Evans, a mom who loves being able to invest the money she saves by living frugally.

There is a common misconception that holds most people back from being able to become financially independent and secure. It's the myth that you need to come from a wealthy family in order to make money. This simply isn't true, as there are plenty of examples the world over of billionaires who were once dirt poor.

Money Myths that Prevent Financial Security

It is falsehoods like this that prevent folks from taking the one simple step that is necessary to build wealth: investing. Another myth that holds people back from investing is the mistaken belief that they can't afford to begin investing now.

While you will need at least some capital to begin investing, most of us can cut back on spending and put our savings towards investment goals.


Simple, Popular Investment Ideas

Some investment ideas, such as buying real estate and becoming a landlord, require a lot of direct involvement on the part of the investor to be successful.

Passive investments allow individuals to build wealth without taking on the daily responsibilities of asset management. The following is a list of some simple, easy and popular investments to help you begin securing your financial future.

Mining Digital Currencies

Cryptocurrencies like Bitcoin are one of the newest ways to invest in digital money. Genesis Mining and similar companies allow users to buy and mine bitcoins and other alternative currencies, such as Ethereum.

These currencies are extremely popular as both an investment and payment method because they are not controlled by a centralized government. They are encrypted which allows secure, and anonymous payments between two parties anywhere.

Once a digital currency is mined or otherwise owned it can then be held, exchanged, or re-invested in other opportunities to earn a profit, making it an attractive investment.

Trading Currency

You can also use your money to trade in currencies with a currency broker. For the best return, you will want to look for a broker that offers low spreads and use stop-loss orders to limit the amount of trading that you do. Most currency markets, whether it's local or foreign, are highly volatile, which make this a risky investment.

Interest Bearing Deposits

Another common way to invest your money is to open a simple interest-bearing savings account or buy a Certificate of Deposit (CD) at a bank or other financial institution. This type of investment earns a specific rate of interest for keeping the funds in the account for a specific amount of time.

While this type of investment has seen interest rates of 10% or more in the past, the last several years have seen rates well under 1%. While this is typically a very secure way to invest your money, it currently offers an abysmal return.

The Power of Pooling Your Money to Acquire Ownership

Want to own a business without the headaches of running it? Then it's best to literally pool your money with others to acquire partial ownership, via purchasing shares of stock.

Ways to Invest in the Stock Market

Several exchanges allow investors to buy stock in publicly traded companies. Many financially sound, prosperous companies have stock that runs into the hundreds of dollars for a single share. This makes it difficult for an individual investor to buy a share outright, through their own trading account.

If you are a worker, many companies offer 401(k) savings accounts that allow their employees to set aside a percentage of their income for investment. These funds are then pooled with others to make it easier to purchase shares of individual stock in specific companies. As well as to purchase bonds or shares in mutual funds.

It's important to remember that stocks, bonds, and mutual funds can all be purchased by any investor, whether that investor is an individual, a worker through their 401(k) or IRA or other pool of investors such as another corporation, government or other group entity.

Mutual Funds Reduces the Amount of Research to Successfully Invest

Mutual funds are one of the easiest ways to invest. Professional fund managers with proven trading expertise typically run them, which benefits investors with little experience in investing and trading.

The fund manager constantly monitors the fund and chooses specific stocks, bonds and other investments to purchase and hold to meet a specific objective. For example, earning a specific rate of return over a given term or acquiring stock and other assets for their potential for growth are common investment objectives.

Bonds Can Reduce Risk in Investment Portfolio

In addition to investing the pool of funds for acquiring assets such as currencies, stocks, metals, and real estate, mutual fund managers often invest in government issued bonds as a way of lowering risk and creating stability in the mutual fund's investment portfolio.

Individuals can also invest in bonds, which is a debt security. It offers a specific rate of return for allowing the issuer of the bond to borrow the money from the investor for a specific period. Bonds can be issued by Federal, state and local governments as well as companies and nonprofits such as private academic institutions.

See my disclaimer.

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