The most important thing that should be analyzed when choosing the form of investing financial surpluses is risk awareness. This element is permanently inscribed in investments, and its size varies depending on the type of investment. If we want to minimize the risk, we have to accept that the profits will probably not be too high. The capital investment market is characterized by the principle that the higher the level of risk, the greater the probability of profit. The method of investing capital then depends on the individual approach of a given investor and on the acceptance of the size of the risk. Either way, it is worth getting to know the various forms of investing on the capital market in more depth, because it is unreasonable from an economic point of view to keep savings, when they can be traded and multiplied just as well.
Cryptocurrencies
With technological developments, the popularity of cryptocurrencies is increasing. A few years ago, they were very popular among ordinary people, and everyone has heard about investors who have earned a lot of money this way. However, after achieving the best results in 2018-2019, it is increasingly common to hear about the problems of this form of investment.
Buying and selling cryptocurrencies takes place on an exchange, where you can trade your own cryptocurrencies. There are many ways to assess the credibility and quality of an exchange, such as liquidity, fees, purchase and withdrawal limits, trading volume, security, insurance, ease of use.
The most popular cryptocurrency is bitcoin, but there are several thousand other cryptocurrencies that are referred to as “altcoins” (alternative coins, including ethereum, considered to be bitcoin’s “little brother”). There are companies on the Internet that act as intermediaries in trading in this type of investment, but it is worth taking into account that the risk of this form of investment is high.
Despite the fact that Bitcoin has returned to the favor of investors in the last year and has become famous again thanks to large increases, such an investment should be considered one of the riskiest in 2021. Why? First of all, cryptocurrencies carry a huge legal risk. One new law or regulation can lead to problems in this market.
Forex
Forex is a wholesale foreign exchange market in which banks, large multinationals, governments, central banks and institutional investors from all over the world conduct foreign exchange operations 24 hours a day using telephone networks, IT links and information systems. The advantage of this market is its huge liquidity, which means that selling or buying any amount of currency at any time is not a problem. The so-called forex traders use volatility to speculate so that they can profit regardless of whether the rate is rising or falling. To invest in this market, you need to choose a brokerage house through which the investor plays on the Forex market. Interestingly, brokers often give beginners the opportunity to play with virtual money to be able to “test” themselves in this form of investment and learn the rules without taking any risk.
However, you should be aware that the entire market is largely based on speculation, and therefore is not very predictable. In addition to outstanding profits, it can also bring the investor severe losses.
Gemstones
In Poland, diamonds are the most popular gemstones. In Western Europe, on the other hand, coloured gemstones (such as emeralds, rubies and sapphires) are more popular. Before deciding whether and with which gemstones to expand your investment portfolio, it is worth getting to know their characteristics and properties, how to initially recognize them, and which of them are most valued on the investment market.
The value of coloured gemstones is determined primarily by the intensity of the colour. It is often the case that rubies and emeralds containing inclusions, but boasting a strong, expressive color, fetch higher prices than specimens without impurities but poorly colored.
Gemstones can be purchased in wholesalers of metals and precious stones, specialist shops and auction houses. The Mint of Poland also has a wide offer. The difficulty in selling them and the long waiting time for a buyer as well as individual valuation for each (natural) gemstone can be a problem for investors. Certainly, the high barrier to entry is a problem. This is a type of investment that requires a lot of capital to start. Some analysts say that this is an offer for the wealthiest investors. Precious stones can also be treated as an investment of capital and assets that stabilize the portfolio during a crisis and financial or political turmoil. Undoubtedly, the advantage of investing in precious stones is the growing demand for jewelry. The sale of valuables and jewels is growing, and these increases reach 5-10 percent per year.
It is also worth mentioning that it is a form of investment that requires prudence and caution from the investor, because on the gemstone market there are often stolen, counterfeit or black market products.
Precious metals
Precious metals such as gold and silver have been money for people from the very beginning of the history of civilization. These metals were chosen as a means of trade by elimination as a result of the free market.
Real precious metal bullion can be purchased in the form of bullion bars or coins. It is unlikely to invest in scrap gold, jewelry or numismatic coins (collector coins). Although these types of products are also traded on the market, none of these options bear the hallmarks of an investment, but it is a simple consumption or hobby.
A bar is simply a cast form of a given metal, with the mint symbol imprinted, a weight and the so-called fineness, i.e. a marking of the “purity” of the bullion. A bullion coin, on the other hand, is a coin that has neither a face value nor a collector’s value. Its only value is the value of the metal used in its production, plus the marginal cost of casting the coin itself. To sum up, this form of investment requires a long-term perspective of value growth, because price fluctuations in this market are relatively small.
Real Estate
Many analyses show that in recent years, investing money in real estate has been the best way to multiply capital. This is influenced by interest rates, which have been at a record low level for a long time.
By investing money in real estate, on the one hand, the investor earns money on the increase in the value of the apartment or business premises over time, and on the other hand, on the monthly rental. None of these sources is certain, but the prospect of future profits encourages many people to invest their capital in real estate. Returns from this form of investment usually range between 7-10% and vary depending on the specifics of the property (flats, holiday apartments, commercial premises, warehouses or land).
However, it should be remembered that investing in real estate is also associated with risk. Finding a tenant may take longer, and the sale of an apartment or premises may take time. In addition, those who financed the purchase of the premises with a mortgage, the increase in interest rates will be associated with a reduction in rental profits, while the period without a tenant is associated with incurring fixed fees and repaying the loan.
IT companies
Investing is an interesting form of investing, but it requires a good understanding of the market. There are industries such as IT or the currently very popular “gaming” industry, which are very popular among investors. It is mainly about profitability. You can also invest by introducing capital into a start-up or buying shares/shares in a larger company. It is worth remembering that the new technologies sector is not only inventions related to smartphones, tablets or the broadly understood Internet, it is also all advanced technical solutions and the latest scientific discoveries. Nowadays, when new technologies have entered everyday life, investment in this sector is very profitable.
Of course, you need money to invest in this way, but in fact, knowledge and creative ideas are the most important and when choosing this form of investment, you should be guided by the experience of the management and the innovation of the idea.
Corporate loans
It is simply lending money to private individuals (investors) and companies looking for capital for development. There are a lot of funds offering the possibility of lending money to companies for a fee. Despite the initially considerable risk, the profit is usually guaranteed and often secured by a mortgage on the property belonging to the Borrower and a promissory note. Usually, the loan agreement specifies in detail the interest rate (usually from 6 to 12%) and the loan period. This form of investment, in which a loan is granted to a company for a definite period of time, requires an analysis of the economic situation of the company, a business plan and a detailed definition of all conditions in the contract. Loans can be granted in the form of a loan agreement or an investment agreement.
Predicting the actual profitability of different types of investments is very difficult. To optimize the risks and rewards of changing market conditions, it is recommended to diversify your savings and maintain several forms of investment.
If you have a large amount of money, it is good to invest in safe forms such as real estate, but you can also choose forms that can bring higher rates of return. Such a strategy will make the capital stable, liquid and bring good income at the same time. When choosing various forms of capital investment, you should always remember that quick actions are never helpful in building considerable wealth and protecting your savings. When expanding your investment portfolio, you need to carefully verify your own capabilities, while bearing in mind the investment risk.
The year 2020 will go down in history. The coronavirus pandemic has triggered significant changes in consumer and business trends that have not been seen since the Great Depression. However, there will probably be more and more ways to invest in the near future. Regardless of everything, it must be clearly stated that any investment is a good idea when it brings satisfactory profits, and is properly protected against the loss of invested funds.