Complex Made Simple

Can you really make your money work for you?

One of the most common pieces of personal finance advice is: “Make your money work for you.” But ever wondered what it truly means? Can you really make money work for you?

The answer isn’t so simple, as there’s no single formula, but everyone can find at least one way to put their money to work. Here are a few ideas to get you started:

Talk to a financial expert

When it comes to making life-changing financial decisions, taking the right financial advice might help save money in the long run. Throughout your life, you’re likely to need different financial products. A financial adviser can help you make the right decision about the best product for you.

While advice isn’t free and Do It Yourself options are available, finding a consultant to guide you through the complex nitty-gritty of all of the financial products on offer is a very good idea. You will have all the facts to choose the right product for you.

Invest in the market

Being in the markets is not the same as trying to time the markets: Pulling money in and out to take advantage of favourable fluctuations and to minimise loss when the market dips is a strategy most experts advise against.

Over time, worrying dips in the market should even out, resulting in an overall gain. To take advantage of this effect, though, you have to leave your investments alone.

It is here that your financial advisor could be most handy.

Based on your personal criteria, you could be looking at investments in a range of asset classes such as global equities, stocks, bonds, foreign exchange, emerging markets, property, commodities, derivatives, mutual funds and many more. Your advisor could help you access different asset classes by investing in one fund.

Understanding leverage

In simple terms, to leverage means to take a smaller amount of money and gain exposure and control over an asset of much larger value.

The benefit of using other people’s money, or borrowing to invest, is that it increases not only your gains, but also your ability to build an investment portfolio in a shorter time. It also allows you to take advantage of investment opportunities when you may not otherwise have the available funds to do so.

But, just as leveraging can increase your gains, it can also magnify your losses, which is why it is important to understand leverage, your tolerance to risk and have a plan to manage that risk.

Real estate

If recent history has taught us anything, it’s that housing isn’t a guaranteed investment. That said, if you have the available cash and risk tolerance, investing in residential or commercial real estate may be a good fit.

Investing in real estate is two-pronged: You could consider buying a single home in which to live, as an investment, or you could invest beyond your home, into land to sell or homes to rent.

Options for High Net Worth Individuals

Being wealthy can mean different things to different individuals, and depending on one’s investment goals and risk appetite, investors may choose to participate in different asset classes.

Whether you’re a novice or an experienced investor, it’s a good idea to familiarise yourself with the various assets out there. To help minimise risk, many investors diversify their portfolios and invest in various asset classes. Besides the routine asset classes, the High-Net-Worth Individuals also have access to hedge funds and venture capital. Here’s a look at the forms of investments the wealthy typically invest in.

The bottom line for any investment remains this: your money is an asset and it should work hard for you in the same way that you work hard to earn it.

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