Once your finances are under control, with secured assets, a well balanced budget, and major purchases planned for, you will want for options to invest any additional disposable income instead of throwing it away. Investing can take many forms, but regardless of the approach, it is usually a meeting of your risk tolerance and your desire for short or long term growth. The more common types of investments are either related to the financial markets, like stocks, bonds, indices, and options, or related to assets which appreciate in value, the most common of which being real estate.
Financial investing can either be done independently or through a broker. It is often desirable to work with a broker, who will carry more skill and experience to the table, and help you balance your expectations and risk to determine the right mix for your investment portfolio. You will often pay either an annual fee or a per-transaction charge, but it is usually worth it as most brokers can leverage their experience to help you avoid common financial mistakes new investors make with greater visibility to larger market trends that often go unseen by the average consumer. If you do decide to invest in the financial markets by yourself, the Internet has numerous sources of information and online trading sites that may minimize trading fees while making trading possible from your couch. An important tip is to try to avoid timing the market, while it is sometimes possible to pick the .best. time to sell an investment and make a profit, the best investments are usually the ones with the lower, and more secure, rate of growth. These kinds of investments avoid the risk that often accompanies more volatile investments. A good investment portfolio is normally one that balances steady slower growth investments with riskier higher growth investments, and matches the risk and reward ratio to your predefined goals and comfort level.
If you look to real estate as an investment vehicle, there are often two different strategies used. One is to purchase real estate to provide a steady income, for example, purchasing an apartment or condo building with the intent of renting out the units as both an income stream, but also as a way of offsetting the cost of borrowing. If you adopt this approach, it is often preferable to have a larger number of units available, as this helps to cushion any vacancies when some individual units are unoccupied or are being renovated and can't be rented. The other strategy, often referred to as ‘flipping', is to purchase real estate with the intent of quickly reselling at a profit. When taking this approach, the goal is to find diamonds in the rough - many prospective buyers will look for properties that can be purchased at a discount. For example, properties that have been repossessed by the bank, ones that are in need of minor repairs but are structurally sound, or properties that benefit from a good location or will increase in value due to zoning changes, are all solid investment choices.
