Financial freedom is at the top of the list of the most important things for many people. Financial stability can help you achieve other things in life. You can travel the world, buy the car of your dreams, live in a good neighbourhood and take your children to the best schools. This article will explain how you can generate a good income with Forex and grow your wealth.
An important factor in wealth creation is the age at which you start doing it. A quick look at the most successful people in the world shows that most of them started building their wealth at an early age. Warren Buffet famously bought his first stock when he was 11 years old. Mark Cuban started selling newspapers when he was ten years old while Mark Zuckerberg started Facebook when he was 19 years old. The same is the case with most of the billionaires in the Bloomberg Billionaire Index.
A good place to start is in education. It is recommended that you invest a lot of your time in getting a good education. At school, do a course that will lead you to better career opportunities. As you do this, you should take the time to explore your interests so that you can specialize in them. If Buffet did not have an interest in finance, he wouldn’t have made it as an investor. Similarly, if Bill Gates did not have an interest in technology, he would not have succeeded as a technology entrepreneur.
After you start your career, a good way to start building your wealth is to participate in the world’s financial market. This is the biggest market in the world with daily transactions worth more than $10 trillion.
In the past, the financial industry was a reserve for the moneyed elites of Wall Street, The City, and Hong Kong. The barriers to entry were enormous and many institutions focused on wealthy people. This made the industry an exclusive club where ordinary people could not compete. You needed money in order to make money.
With technology, innovation and globalization, this situation has changed. The materials to learn about the market have been made available at lower prices or for free. There are many ways you can invest your money. These methods are mostly classified into three categories: active investing, passive investing, and fixed asset investing.
Fixed asset investing
This refers to the process of investing in a physical product. A common method of fixed asset investing is real estate. This refers to the process of buying or building commercial and residential houses. Commercial property refers to offices, institutions and retail properties. Residential property refers to houses for people to live in. These could be single family houses (SFH), condominiums, townhouses, co-op, multi-family homes and land. With these assets, you can generate income by selling them in the open market. Another option is to lease them where you will generate a monthly or quarterly income.
The advantage of fixed asset investments is that they are relatively safe investments. An added advantage is that the value of these assets tends to always go up as demand increases over time. For example, if you have leased a building, you will receive the funds from the property. You can also use the property as a guarantee to a loan to help fund other investment opportunities. And ultimately, you can sell the property and the land. The challenge for this type of investing is that it requires a lot of money to get started. This includes the cost of buying the land, getting the approval documents and putting up the buildings.
The fixed asset investments described above are a form of passive income. Other types of passive investments are those which track an index and a portfolio. With these, instead of taking time to research multiple stocks, you simply invest in an index that tracks stocks that you might be interested in.
There are thousands of indices that you can invest in. For example, if you want a global portfolio of the biggest companies in the United States, Germany and France, you can buy the Dow Jones Industrial Average (DJIA) index, the DAX and the CAC 40. By buying the three indices, you will be indirectly investing in over 100 companies from the three countries.
If on the other hand, you believe that the technology sector will change the world and continue to grow, you can research on the companies in the sector. After doing that, you can invest in the individual sector. Alternatively, you can invest in the Nasdaq index that is made up of 100 of the biggest technology companies in the United States. Alternatively, you can invest in the S&P information technology sector.
Similarly, you can invest in indices of other sectors which include finance, utilities, materials, retail, communication services, energy and real estate. If you want geographical diversification, you can invest in the S&P 500 index, DAX, CAC, Shanghai Composite and Nikkei if you want exposure in the United States, Germany, France, China and Japan.
The three main benefits of this type of investing is that it is well diversified, safer than individual stocks, and has performed well over the years. It is mostly ideal for your long-term investments.
This is a type of investing is where you buy or short securities, watch them closely, and hold or exit them when necessary. Therefore, active managers regularly pay attention to the market with the aim of finding opportunities or exit others. There are a number of securities you can invest in, including:
Stocks: These are shares that are listed in the exchange when a company releases its Initial Public Offering (IPO). Here, the goal for an active investor is to buy stocks that are cheap and wait for the price to move up. They can also sell or short the securities they believe will fall.
Bonds: A bond is a debt that is issued by a company, municipality, state or the government. The funds are used to fund growth and other fixed investments.
Commodities: These are the raw materials that are used in the production process. Examples of commodities are corn, soybeans, gold, silver, palladium and zinc among others. The goal is to buy commodities you believe will see a rise in price and short those you believe will fall.
Currencies: Currencies are used to make transactions. A value of a currency can move up or down depending on the technical and fundamental factors. This is called foreign exchange investing, or forex for short. There are now a wealth of forex brokers offering online platforms that make it easy to access the currency markets.
ETFs: ETFs are similar to indices in that they are made of a group of securities. Since ETFs are public, you can easily buy and sell them.
There are a number of advantages for active management.
You don’t need a lot of money to get started. As an investor, you don’t need to invest in fixed assets like offices. Instead, you can start investing from your home.
Many online brokers allow you to start investing with as little as $500.
By being an active investor, you can easily spot opportunities whenever they arise. For example, if the amount of crude oil inventories falls, you can easily invest in crude oil. If a major copper mine closes down, you can easily buy copper. All this is possible because short-term movements don’t always reflect the long-term value.
Multi-direction: You can buy assets you believe will see their price increase in value. You can also short or sell those you believe will fall.
Leverage: Many online brokers allow you to use leverage when investing. This allows you to buy more securities which exposes you to more potential profits but that comes with increased risk.
Tips on how to start
To succeed as a fixed asset, passive and active manager, the most important thing you need to do is to learn. Fortunately, there are a lot of materials you can find on the internet to help you improve your skills. Examples include books, white papers, videos and comprehensive courses. You should take time to learn more about the various ways of investing and how you can allocate capital.
Second, you need to diversify your investments. This is the process of investing in different assets and using different strategies. For example, you can invest in real estate, indices and different stocks at the same time. This will help you manage risk and balance losing investments with winning ones.
Third, have cash. As a way of diversifying your portfolio, it is important to have money saved in a bank. The benefit of this is that cash is the most liquid asset. This means that you can always use the cash to buy anything. For example, while stocks are also liquid, you cannot use them over the weekend when the exchanges are closed.
Finally, always manage your risk well. It is recommended that you have good risk management strategies that will help you mitigate risks. For example, in active management, you should always have a stop loss. This is a tool that stops your trade automatically when it reaches a certain predetermined level.