Retail investors, especially new or younger investors, often forget that investing takes a combination of research and activity in order to produce results that you can trust as repeatable. Often times, an investor will find a great investment opportunity but lack the ability to capitalize on the commodity for lack of brokerage resources. Other investors have found fantastic access to marketplaces and capital but lack the experience to take advantage of the best trades on the market. Any investment adviser worth their credential will tell you that finding a happy medium here is crucial to a successful investment strategy and a growing net worth.
Sticking to the Fundamentals
Learning and data analysis are the bedrock of any successful trading strategy in capital markets. It doesn’t matter what asset classes you’re investing in, without the fundamentals to evaluate the marketplace and select high-quality investments, you’re doomed to fail. Many investors start out in the stock market for this reason. Stocks are easy to access, and brokerage accounts often provide investors with free trades and plenty of resources for conducting their own market research.
The key here is taking advantage of the resources that you’re given. The stock market averages about an 8% increase per year over its 200-year-plus history. This means that index funds are likely to average out to an 8% per year return over the long term, yet in recent years, this designation has been somewhat uncertain. This is a pretty good jumping-off point, but as an investor with a vision of wealth in the future, this won’t cut it. You’re going to have to learn to time the market and take risks on investment opportunities that appear poised for a breakout in order to create additional wealth generation opportunities.
Growing your portfolio requires you to learn these lessons—and indeed fail a lot while doing this. The stock market is a great place for this training ground. Stock prices are fairly elastic and offer investors a good bounce back after a beat down by any poorly picked stock. Learning about accredited investor requirements is also a great place for stock research to take you. Accredited investors are those with the knowledge and experience to continue making positive trades and shrug off short term losses. They focus on short term risks and long-range solutions in order to try to beat the market with additional investment opportunities that may exist within the stock market or that lie outside it altogether.
Moving Into Real Estate
Many investors make the leap from the stock market and into the real estate marketplace after they find the market’s ceiling. Real estate offers a fast-paced investment landscape in which buying and selling can happen as quickly as you can handle. Home flippers attempt to refurbish and relist homes within weeks or months of a buy, with the lump sum payout hitting their accounts as quickly as they can possibly move from one property to the next.
Buying real estate requires a different kind of broker, though. Here, you’ll be working with borrowed money, at least in the short term. Utilizing a lender like Pacific Private Money to gain access to fast capital in order to make buys quickly in the marketplace is a great way to move into real estate and gain a foothold in the property ladder. Depending on your strategy here, your lender—or finance broker, in a sense—will offer a few different loan structures to the general public or institutional investors alike.
For rentals to provide an adequate income level, a longer-term loan is a great option; lower monthly payments means that you can roll more of the monthly income into other investment opportunities while still covering your mortgage obligation to the lender. Alternatively, for borrowers looking to flip homes, the lowest interest rate possible is often the best, since you’ll attempt to own the home for as short a duration as you can. The lower your interest rate, the less you will owe when paying back the mortgage as a lump sum after a few sales break your way.
Investing is all about the marriage of knowledge and access. Finding your way to both of these will help you build a winning strategy.
HedgeThink.com is the fund industry’s leading news, research and analysis source for individual and institutional accredited investors and professionals
