How to invest money
If you don’t have a lot of money, but want to invest for maximum profits – try Forex.
Living off the passive income is a pipe dream for many people. Being able to dedicate your life to your hobbies, your family or even simply self-improvement surely sounds nice. However, not many ever reach that point in life – either due to the lack of dedication or poor financial judgement.
With this article you will:
• Understand the way investments work;
• Explore the differences between different investment types;
• Learn which investment opportunities are better for different situations;
• Find out how to start investing with a starting capital of $100.
What is an Investment
Investment is a purchase of assets with an intent to gain profit from them in the future. Investments come in all shape and forms: real estate, precious metals, corporate stock, foreign currency and many others. You can even invest in debts that other people owe.
Overall, there are two different kinds of investment opportunities: long-term investing and trading. Let’s review both of them in more details.
Why long-term investing is not viable
Long-term investing is the most passive form of income imaginable – you purchase the thing and then forget about it for a couple of years while it grows in value. The best long-term investment opportunities are:
• Precious metals;
• Real estate.
However, there is a massive downside to long-term investing – it doesn’t make you much money.
Imagine, that you have 1,000,000 USD – a rather formidable sum. If you were to invest all of it into the stock market and never touch it again, you are looking at the 7% average annual return, which is:
• 70,000 USD annually without taxes;
• 53,250 USD annually with a 24% income tax.
4,000 USD monthly is just a bit higher than the median income for the New York City resident (50,000 USD, according to WNYC). And we are not quite done yet.
Your investment will lose around 3.05% of its value annually due to global inflation rate – so it needs to outperform it to be profitable. This means, that in order to maintain your profits, each year you’ll have to invest 30,000 USD back.
This means, that your 1,000,000 USD investment will bring you only 23,250 USD of pure profit each year – well below the living rate in the US.
At the end of the day, long-term investments are just not viable as your only form of income. You need to be a millionaire to afford even a non-luxurious living. Luckily, there is another option.
NOTE. We didn't focus on precious metals here, because their 3% annual return is actually below the inflation rate. The real estate market, while profitable, is also a non-option for passive income, since you can only sell the house as a whole. Which means that you will have to wait for years before seeing your dividends.
Trading and speculation
Investment opportunities tend to change their value – it’s called volatility. For example, if a company has a bad performance report, the value of their stock will go down. However, if they have a successful announcement later, it will go back up again.
If you take time managing your investments, you can speculate on the market volatility. This gives you a much higher profit factor, in addition to the usual market growth. This way you can start with a smaller amount, and get more money than with long-term investing.
However, there is also a large element of risk involved. In order to minimize it, you will have to learn the trading strategies and overall dedicate your life to it for a while.
Best trading investments
In order to be interesting for traders, the market should have a lot of volatility. That’s why the best trading investments are the stock market and the currency market.
Stock market trading is pretty profitable. TheBalance.com insists, that the net profit of a successful stock market trader with a 30,000 USD investment is around 8,250 USD per month.
On the other hand, 30,000 USD is a mandatory starting investment - and even then it’s recommended that you have at least 1:4 leverage. That’s a lot of money just to try your skills at something, and it rightfully scares a lot of potential traders away.
Forex and cryptocurrency market
Forex stands for Foreign Exchange, where governments and international corporations trade currencies and influence their value. The standard lot at this exchange is 100,000 USD, which tells all you need to know about the scale. Only the richest men in the world can trade on Forex on their own, and even they can not influence the market by themselves.
However, you don’t have to influence the market to make money. Most Forex traders simply “surf” around on the waves made by the big players, using the created volatility to sell high and buy low. It carries a significant risk and requires fast financial decisions, but it can be extremely profitable.
Starting capital is also less of an issue - you can start as low as $100 and scale as you go. The leverage, while available up to 1:3000, is not mandatory - if you are satisfied with lower profits, you can grow naturally too.
Another interesting market is cryptocurrency – it is even more hectic and volatile than the Forex, but getting into it properly requires even more knowledge, preparation and luck. Luckily, some Forex brokers work with cryptocurrency too.
The best forex and cryptocurrency broker for Nigeria
There is a lot of scam going on with Forex. The legal systems of most countries turned out to be unprepared for the Forex popularity and for a long time weren’t able to properly prosecute the scammers - who used it for their advantage. It all culminated with the CrownForex exit scheme in 2008, which finally lead to better regulation.
However, there still are some brokers who keep scamming their users. Which is why it’s important that you pick a good broker before you start trading. And JustForex is the best Forex broker for Nigeria.
• Leverage up to 1:3000. We do not have a minimum deposit requirement, so you can start with whatever money you want to spare. And if your trading strategy holds up, you can use the leverage to increase your profits.
• 8 account currencies. We also offer 180 currencies for trading, so that you will always have a large selection of trading instruments.
• Spreads from 0.1. A lot of the beginners’ trading strategies depend on tight spreads, so we offer 0.1 points spreads on the major currencies.
• Cryptocurrency trading. Forex has its moments of stability, so we know offer cryptocurrency pairs, where volatility never stops.
• No commission on the Forex accounts. We make our profits from spreads, so we won’t charge you more.
If you don’t have a lot of money, but want to invest for maximum profits – try Forex. However, before you risk your actual money, you should:
• Learn the basics of Forex trading;
• Install MetaTrader 4;
• Create a demo-account.
Only once you are regularly in the green on the demo account, should you start day trading for actual money. It’s a long way, but it allows you to reach financial independence and large profits. So decide what you want, and if you are ready – sign up for a JustForex account.
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