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If you’re lucky enough to have any spare cash, we recommend you to start investing. By making the right investment decisions, you can obtain a perfect passive income source.
Purchase of shares
A share is a security certifying right of its holder to manage and receive part of the profit of a joint-stock company. Many people own shares, but only those who have a controlling stake or the largest number of shares have real ownership and management rights. The rest of the shareholders are called “minority shareholders”, and their benefit consists mainly in receiving income per share.
The method is well-known, reliable, and even state-guaranteed. However, in recent years, bank deposits have become less profitable. With negative interest rates, bank deposits turned into a money storage for a fee.
However, when the deposit rate exceeds the inflation rate, a bank deposit becomes a very safe investment, as the refund of the deposit is guaranteed not only by the bank but also (to some extent) by the state.
A mutual fund is a company that pools money from many investors and invests money in securities, stocks, and other income-generating projects. Mutual funds make money for the investors by investing their money in other people’s assets that bring profits.
The investments are made by professional managers who charge a fee for their services. Therefore, investment in a mutual fund is less profitable than the direct purchase of assets, but in most cases safer.
Exchange Traded Fund
However, some funds operate in the open market. One of them is ETF (Exchange Traded Fund). Like other funds, they invest in securities: stocks, bonds, and different debentures. After that, ETFs issue their own shares with the same price and yield levels as the average index of securities from the investment portfolio. So, an ETF that buys the stocks of high-tech companies receives an average income from the shares of these companies.
There are many other noteworthy investment options, but they aren’t suitable for the majority of new investors. These are operations on exchange and OTC markets, Forex, binary options, cryptocurrencies, tokens, etc.
How to invest $20,000?
With this amount, you can do all of the above. However, there are many other options:
- You can decide on how to invest 20k in the mutual fund offering the best conditions.
- You can make investments in real property and get rental income.
- If you have $20,000, you can start trading Forex without fear of losing all your money on the first deals.
- For $20,000, you can buy stocks, and then sell them for dividends.
Using any of these methods, you can make a lot of money. However, it requires knowledge and personal efforts (the other option is to hire the services of professionals who will do all the work for you).
Investing is not only for rich people. Investment is what helps the investors to become financially independent in the first place. Regular investment of small amounts of money leads to gradual financial growth. The most important thing is to remain calm, avoid Ponzi schemes and be able to apply the right strategy.