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If you want your money to grow and you don't mind a bit of a roller-coaster-type ride from time to time in your investment's values, ownership investments are for you. Ownership investments are those where you own a piece of some company or other assets (such as stock, real estate, or a small business), which has the ability to generate revenue and, potentially, profits.
If you want to build wealth, observing how the world's wealthiest have built their wealth is enlightening. Not surprisingly, the champions of wealth around the globe gained their fortunes largely through owning a piece (or all) of a successful company that they (or others) have built. Take the case of Bill Gates, college dropout, as an example.
In addition to their own businesses, many people have built their nest eggs investing in real estate and the stock market. And of course, some people come into wealth the old-fashioned way — they inherit it. Even if your parents are among the rare wealthy ones and you expect them to pass on big bucks to you, you need to know how to invest your money intelligently. Investing is a smart move, as long as you understand and manage the risks.
 | If you understand and are comfortable with the risks and take sensible steps to diversify (don't put all your eggs in the same basket), ownership investments are the key to building wealth. In order to accomplish typical longer-term financial goals, such as retiring, the money that you save and invest needs to grow at a healthy clip. If you dump all your money in bank accounts that pay little if any interest, you're likely to fall short of your goals. |
The stock market
Stocks are an example of an ownership investment, because they represent shares of ownership in a company.
If you want to share in the growth and profits of companies like Microsoft, you can! You simply buy shares of their stock through a brokerage firm. However, just because Microsoft makes money in the future, there's no guarantee that the value of its stock will increase. In fact, the value of your Microsoft stock can decrease. But at least the next time you call Microsoft and fork over $35 for technical support, you'll have some small satisfaction knowing that you indirectly profit.
Some companies today even sell their stock directly to investors, allowing you to bypass brokers altogether. You can also invest in stocks via a stock mutual fund, where a fund manager decides which individual stocks to include in the fund.
The stock market is a fine way to build wealth. If you can practice some simple lessons, such as making regular and systematic investments and investing in proven companies and funds while minimizing your investment expenses and taxes, you'll be a winner.
However, don't count on "beating the markets," and you certainly can't beat the best professional money managers at their own, full-time game.
Real estate
Owning and managing real estate is like running a small business. You need to satisfy customers (tenants), manage your costs, keep an eye on the competition, and so on. Some methods of real estate investing require more time than others, but many are proven ways to build wealth.
You can build easy money in investment real estate equity (the difference between the property's market value and debts owed). And the idea of leverage — making money with borrowed money — on the real estate also appeals to a lot of people.
Small business
Unlike the part-time nature of investing in the stock market, most people work at running their business full time, increasing their chances of doing something big financially with it. If you try to invest in individual stocks, by contrast, you're likely to work at it part time, competing against professionals who invest practically around the clock.
Most small business owners quickly point out that the entrepreneurial life is not a walk through the rose garden (although it does have its share of thorns). Emotionally and financially, entrepreneurship is sometimes a roller coaster. In addition to the financial rewards, however, small business owners can enjoy seeing the impact of their work and knowing that it makes a difference.
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