Most conscientious people will at some point question themselves on how an investment works and how to invest.
The answer will often be the same: build returns. Money makes money; it is sometimes said. And that is absolutely right, because, with savings and investments, you build up capital without having to put in much effort.
Why should you invest in stocks? The investor is rewarded for the risk he takes by investing, in the form of a price increase of a share. Also, many companies distribute part of the profits in the form of dividends to their shareholders. The stocks of companies that are known to pay dividends regularly are called dividend stocks and this is the topic of the discussion.
In the long term, the returns of a dividend stock are usually higher than that of, for example, a savings account. However, the value of an investment may decline in the short and medium-term. The longer the period over which you invest, the greater the chance of an average attractive return.
Before you start investing in dividend stocks:
- Know the risks
Investing is an attractive way to build capital overtime. However, there are also risks involved. You need to know what risks are involved and be able to bear them. Here we are just talking about stocks that pay dividends regularly, but most companies do not distribute anything, moreover even with companies that do, there is no guarantee that they will continue doing so in the future, especially in the period of a crisis.
- Set your goal
You must have a goal in mind to invest in a way that suits your goals the most in order to have a sense of direction.
How much money does it take to achieve your goal? Perhaps you invest for your pension, or to purchase another home in the long term. Or do you want to build up capital for the future?
- Think about how long you are going to invest
Determine how many years it will take you to reach your investment goal. This period is also referred to as the investment horizon. The longer this horizon, the more time you have to absorb any interim decline. The longer your investment horizon, the less risk you need to take to achieve your investment goal. After all, you have the time to wait for a reasonable period at the fairs.
Tip: Always have a savings buffer, so that you do not have to use your investments for unforeseen expenses.
Let’s now talk about other investment options to invest and earn a good profit. i.e. buying debt and real estate investments.
“Buying debt means buying someone’s debt for a discount and making money by collecting more than was paid by the lender to the borrower.”
Debt buying investors invest good money to buy a collection of debts, they often they buy a large among of bad debt at a discounted price. Large companies buy up the vast portfolios of debt directly from creditors.
How can you earn from it?
A ‘debt purchaser’ picks up debt available on the market rather than seek debt held by other firms or individuals.
Real estate investments:
The potential return is one of the most important benefits of real estate investing. This return is certainly higher when investing over a more extended period of time in real estate than on most investments and this potentially high return makes it possible for you to achieve your financial goals faster.
On the other hand, the risks you run when investing in real estate are the disadvantages of investing.
Investing in real estate can be done physically in the form of an actual purchase of a property but this can only be done locally.
Real investments openly on sale on the world financial markets are for the most part, REITs.
REITs are of two types: they contain debt linked to real estate such as mortgages or they are linked to the ownership of buildings, those are the real REIT property investments.
It is important to differentiate between the different types of REITS as some hold debt while others hold real estate and not all real estate REITS give the owner of the reit any real ownership of the property within the reit but rather the ownership of the reit share gives right to ownership of the paper asset linked in an indirect way to the real estate or debt owned within the real estate investment trust.
Other regulated real estate investment products that are usually not sold on financial markets but are readily available for purchase worldwide are real estate financial investments made through online crowdfunding platforms such as Fundrise, Cardone capital or Solomartel.
Fundrise sells shares of REITS through the web called eREITS, these are usually no different from REITS available on financial markets.
Other crowdfunding platforms offer investment products that are slightly different from REITs and involve a more direct ownership of real estate through the participation and ownership of funds and properties within them. These are the investments products sold by Cardone capital and Solomartel.
Both companies work by finding and negotiating investment properties and placing them under contract. Like real estate investment trusts, the real estate projects are organized in funds, the entities of which will be owned directly upon participation in a fund. Once the raising period has ended, the funds begin their operations. The properties within the fund are then placed on the market and rented by private or corporate tenants, the rent is then distributed as returns to the investors.
Cardone capital operates locally in the United states of America and is slightly less regulated and more adapted to the American legislation, therefore there are certain distinctions and restrictions on the investments investors can make as the investors are separated between accredited investors and non-accredited investors
Solomartel is less focused on a particular jurisdiction and operates worldwide, it is also more regulated which makes it slightly easier to invest in their funds, especially from outside of the US.
Cardone capital and Solomartel provide an alternative to dividend stocks or real estate investment trusts, these investments are less liquid as they are directly linked to real estate and cannot be openly sold on the financial market but they provide higher returns, are less risky and have provided steady returns during world economic crises. In 2020, Solomartel has publicly revealed some of the data regarding the performance of their properties following the 2008-2009 world economic crisis that clearly show that the rents on their properties have not decreased more than 25% during the crisis.