Investing your money or putting it to work to generate more wealth is the next step you should be able to take after learning how to save. If you still have doubts about how to start your savings or you don’t dare to take that step, here we share how to save, 5 rules for beginners.
Investing your money implies knowing how to see the potential of each peso to generate more money, as Sofía Macías explains in her book Little Capitalist Pig. Investing your money is one of the best ways to increase your wealth and guarantee a better future for you and your loved ones.
In addition, by investing your money you prevent it from losing value over time, because if you only keep it saved as savings instead of putting it to work, due to inflation your money has less and less purchasing power. That is, if you now have a savings of 50 thousand pesos, for example, if you do not invest them, over the years and even just a few months, that money will be enough to buy fewer things even when it is the same amount.
Basic concepts before knowing what to invest your money in
According to Robert Kiyosaki in his book guide to investingthere are 3 different types of income:
Earned income. It refers to the income that is generally obtained from a
employment or some kind of work, that is, wage income. In addition, this type of income is taxed with the highest taxes, so
that it is more difficult to create wealth with it.
portfolio income. It is generally derived from paper assets, such as stocks, bonds, mutual funds, among others. Entry
portfolio is the most popular form of investment income, because the assets
on paper they are much easier to manage and maintain than all the others.
Passive income. It is generally derived from real estate. It can also be derived from patent royalties or license grant agreements.
license. Approximately 80% of passive income comes from real estate
real estate because there are many tax advantages for real estate.
So while earned income is typically used to build savings, you need to invest that saved money to earn profits on these savings and earn portfolio income and passive income, depending on the type of instruments you invest in.
What instruments can you invest your money in?
There are multiple instruments today in which you can invest your money so that your money works for you and generates profits instead of just keeping it in storage. Here are some options recommended by Sofía Macías:
- Real estate to invest or rent. It is considered one of the safest forms of investment, since real estate increases its value over time and allows you to obtain a regular and constant cash flow. If you want to learn more about this type of investment, we share with you How to invest in real estate? Know these modalities.
- Franchises. A franchise is an investment scheme that offers the possibility of joining chains that already have a certain prestige in the market, acquiring the rights to use the brand, as explained by CONDUSEF in its magazine protect your money. This type of investment allows investors or franchisees to obtain profits, while companies increase their presence and ensure more dividends. If you want to know more about the subject, we share the cheapest and most profitable franchises in Mexico.
- Start your own business. Starting your own business is one of the best investments you can make, since everything will largely depend on you: your business will be born from an idea, which most likely originates from your tastes, from what you are passionate about. If you forge a good plan to move your idea forward, how can you not get the desired profits and success, if you are going to put all your time, resources and passion into something you love?
Of course, there will always be challenges to overcome and not all the path of an entrepreneur is uphill, but if you follow your plan and rethink it as many times as necessary, it is undoubtedly a great way to invest your money. If you want to know more about it, we share the art of entrepreneurship and having a small business.
- Vending machines. Vending machines are a good example of passive income, meaning the business owner does not have to be present to generate money, making them one of the best investments. If you want to know more about it, we share with you how much you can earn with a vending machine.
- Investment funds. Also known as investment companies, it is an instrument that consists of bringing together the money of many small or medium investors to buy other instruments that they could not buy individually. If you are an entrepreneur and you are interested in this instrument, we share with you Investment Funds, an accessible financing option.
- Invest in the stock market. Investing in the stock market, in the simplest way possible, is like buying small parts of the companies that are part of the Stock Market (shares) and the possibility that those fragments of the company are worth more in the future, which implies higher profits for the company and returns for investors who buy shares, as explained in the Little Capitalist Pig. If you want to know more about it, we share with you what the Mexican Stock Exchange is and how it operates and how to invest in the stock market to earn money.
What should you take into account before investing your money in any instrument?
Before starting to invest your money, it is necessary to know some aspects that can help you evaluate which of the instruments is the best for you. As Sofía Macías explains in her book, there are 4 main variables that you need to know before choosing one or more investment instruments:
- Liquidity. How often will you be able to dispose of your money? Are there penalties if, for some reason, you need to remove it earlier? In the case of goods, how quickly could you sell them without affecting their price?
- Horizon. How long, ideally, should your money be invested for it to generate returns based on the level of risk you take?
- Yields. How much profit did you make in the past? Although it is not a guarantee that it will give the same returns in the future, at least you will have an idea.
- Risk. What are the chances of something going wrong? And in case it goes wrong, how much could you lose?
Now that you know some options to invest your money and what you should evaluate before choosing one, we share with you what you should consider if you are over 60 years old and want to start investing.
Rocio Reyes Communicologist specialized in science journalism and digital marketing. Curiosity leads this being with a cat personality to find links where there seem to be none. Whenever I can, I like to contribute even a grain of what I have learned. Fan of the world of entrepreneurship and MMA.