The habit of spending everything you earn can end up leaving you in a bad light, so it becomes necessary to save and earn income from it.
That's when a question comes up: How do you make money work for you?
Knowing well the stage of life you are in and defining goals and objectives, it is possible to establish strategies for investment choices that will make your money pay off satisfactorily.
In this way, you can achieve the long-awaited financial independence, which will provide you with a more peaceful and comfortable life.
In this post, we'll give you some simple and effective tips on how to make money work for you. Read on and learn how to avoid financial headaches in the future.
Have more passive income and less active income
The resources you receive without having to devote much of your time are called passive income.
Some examples of this type of income are copyright and dividends from investments.
It may seem like a distant dream to make money this way, but it's totally possible and simpler than it sounds.
To live on passive income, you need to be a little more dedicated in the beginning and, as time goes on, there is less need for effort. Soon you will have the comfort and security you've always wanted, closer and closer to your financial independence.
Active income is the opposite of passive income, as the earnings arising from it are the result of work performed.
Examples of active income are: your salary, fees charged from clients, commissions on sales, etc.
The big risk of relying on working income is that if you are unable to work for any reason, the money may stop entering your bank account.
The problem is even greater in the case of self-employed professionals, as they are not protected by labor legislation.
For this reason, having more passive and less active income brings security to your financial life, being a complement to your daily income.
Think long term
You will not achieve financial independence overnight.
For this, it is necessary to make a long-term planning. So don't put it off until tomorrow and start right now. Outline your goals, assigning them their values and completion date.
Once this is done, try to study the investments available in the financial market in your country, taking into account the time that you will leave the money invested.
The investment time works as a springboard for the profits of your passive income, as it operates through compound interest. This means that the more time you leave the money invested, it will be remunerated even better.
For example, if you invest U$300 every month in a bond that yields 0.5% a month, after 5 years you will have approximately U$21,000 accumulated.
After 10 years, this amount rises to almost U$ 50 thousand. In the first 5 years, the income was around U$3,000, while in the last 5 years, the income increased to approximately U$14,000.
You can see that it's worth it, isn't it?
Diversify assets
The golden rule of investing is not to put all your eggs in one basket. Therefore, diversifying is essential to minimize the risk of your applications.
When you vary your investments, you increase your chances of success. Therefore, look for smart ways to allocate your assets, never opting for just one.
By dividing your money into several applications, you create a trade-off between gains and possible losses (which can take place literally, in the case of a fall in shares, for example, or in the loss of an opportunity for higher returns, when all the capital is spent available in a title and realizes that if he had chosen another, he would profit more), balancing his results.
There are some good practices for correct capital allocation.
That's why you need to create an investment plan.
With that, let's go to the next tip!
Create an investment plan
If you are looking for good returns, you should not choose investments at random. You need to consider what the goals are as clearly as possible.
Only then will you be able to understand how to allocate investments.
The first step is to define the percentage you will invest in fixed or variable income.
Afterwards, it's time to stipulate which assets will be chosen in each category, and only then will you decide the amount to be invested in each modality.
Always pay attention to the risks of the products you have chosen and make monthly investments to balance your investment portfolio.
Know more about exchange traded fund - ETF
An exchange traded fund (ETF) is a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same way a regular stock can.
An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities.
ETFs can even be structured to track specific investment strategies.
A well-known example is the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 Index.
ETFs can contain many types of investments, including stocks, commodities, bonds, or a mixture of investment types. An exchange traded fund is a marketable security, meaning it has an associated price that allows it to be easily bought and sold.
- An exchange traded fund (ETF) is a basket of securities that trade on an exchange just like a stock does. ETF share prices fluctuate all day as the ETF is bought and sold; this is different from mutual funds that only trade once a day after the market closes.
- ETFs can contain all types of investments including stocks, commodities, or bonds; some offer U.S.-only holdings, while others are international.
- ETFs offer low expense ratios and fewer broker commissions than buying the stocks individually does.
An ETF is called an exchange traded fund because it's traded on an exchange just like stocks are.
The price of an ETF’s shares will change throughout the trading day as the shares are bought and sold on the market.
This is unlike mutual funds, which are not traded on an exchange, and trade only once per day after the markets close.
Additionally, ETFs tend to be more cost-effective and more liquid when compared to mutual funds.
An ETF is a type of fund that holds multiple underlying assets, rather than only one like a stock does.
Because there are multiple assets within an ETF, they can be a popular choice for diversification.
An ETF can own hundreds or thousands of stocks across various industries, or it could be isolated to one particular industry or sector.
Some funds focus on only U.S. offerings, while others have a global outlook.
For example, banking-focused ETFs would contain stocks of various banks across the industry.
Investing in stocks on the stock exchange
The stock exchange is an online marketplace where various financial products are traded. Among them are shares of companies from different sectors and sizes.
To make your money work for you through investments in stocks, first of all, you need to know if you are willing to take greater risks in order to obtain greater returns. The percentage of your capital to be invested in variable income assets is given by the rule of 100.
Know that this type of investment can yield great profits, both in daily operations (day trade) and in the long term. Know some advantages of investing in stocks:
- it is a very safe operation, since it can only be done using the services of a stockbroker, responsible for the intermediation between the investor and the stock exchange;
- it is affordable, as there is no minimum initial contribution and there is no need to make more monthly deposits;
- it is simple to access, just having an active account at any brokerage firm accredited with the Central Bank to enter a Home Broker and acquire the assets.
Acquire real estate assets
If you are looking to have an efficient investment portfolio, you should pay attention to real estate assets. Among the ways to invest in them, one of the most accessible is to acquire shares in real estate funds.
Like shares, these shares are traded on the Stock Exchange, through a Home Broker, and can be purchased and sold daily.
Since this is a type of variable income investment, it is important to study the matter carefully so that you can make the correct choice of funds.
Pay attention to market changes
When a person sets out to become a conscientious investor, he must assume responsibility for keeping himself informed about news and trends in the financial market.
Good options today may lose value tomorrow, and what doesn't look promising at one moment may turn out to be the goose that lays the golden eggs the next.
The Interest Rate has changes in every situation of crisis, so that investments linked to it or to this kind of index are yielding far less than what they did a few years ago.
And when it comes to variable income, looking at the present and the future becomes crucial so that there is no loss of invested money.
Often, with the rush of work and busy schedules, it is difficult to stop and study about investments, but, contrary to popular belief, it is not necessary to spend a lot of time to learn how to make money work for you and have a healthy control of your equity.
If you have greater difficulties, there is always the possibility of resorting to the services of an investment advisory.
As we've seen, there are several ways to make your money pay off. Just keep yourself informed about the most diverse options on the market, always considering your goals, fears and anxieties, in order to choose the best investments for the short, medium and long term.
Now that we've told you how to make money work for you, how about having access to more information on how to invest your own capital and move closer and closer to your goals?
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