Today we are going to look at a few tips that deal with investing in the stock market and similar investment products. As a real estate investor you are probably always looking for ways to further increase all the money you are making in real estate . So here are a few tips to help you invest that extra cash lying around.
6. Effective and nominal interest rates
You need to know what the difference is between effective and nominal interest rates. Banks quote you a nominal interest rate when you borrow money from them and a higher effective interest rate when you invest your money. The nominal rate is a simple rate while the effective rate is calculated by compounding the interest rate earned.
7. When is your interest rate paid?
You need to find out when your interest is paid. Id it credited monthly, quarterly or annually? Why? Becuase let say you invest R 10 000 for 10 years at 10%. Your interest is paid out annually so your total return is R 25 937 but if it was credited every month you would receive R 27 070 so it does matter.
8. Should you invest directly in shares?
If you are interested in the progress of companies and you have the time to learn how to invest go for it. If on the other hand you don’t really care about what companies are doing and the thought of the stock market makes you feel a bit bored you probably need a financial advisor or invest in unit trust funds or life assurance endowment policies. These have shares as the underlying investments. But always consult a financial advisor if you are not a financial guru yourself. Yes the costs are higher but not as high as losing ALL your money.
9. So you feel you can invest directly in shares, so what now?
I am sure you’ve heard of the saying “Diversify, diversify, diversify” (please revisit our previous article “Money tips: 1 to 5″ and look at “4. Diversify, diversify, diversify.”). This will decrease the risk of losing all your money and you should do this across the stock market sectors. Another thing you should do is to rebalance your portfolio. When some of your shares prices rise you should consider selling some to make a profit and then if the share price keeps rising you can still make more money. Investing directly in the stock market does come with a warning. You will have to do some learning and research to make sure you know what you are doing. I would suggest that you go to seminars,l do a course etc. to get as educated as you can.
10. Is the investment product too complicated?
If you don’t understand an investment product and it seems too complicated you might want to avoid it. Sometimes some financial advisers will try to impress (actually confuse) you to buy their product. If you’re smart, you’ll walk away. I ask as many questions as it takes and if it takes too many, I go else where. Remember, it’s your money, they want it, so be “dumb” and question, qouestion, question.
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