Top 5 Investments to retire rich
Invest your time in yourself it will pay you the best interest.
But if you want to invest your money, there are many forms of investments you can make. Some of the classic ones being a savings accounts, fixed deposits, mutual funds, bonds and securities, etc. However, they won’t help you retire rich. Here we will discuss ways to invest that will help you efficiently reach your goals.
Before going there let us list some fundamentals that should be golden mantras for you in the coming years.
The Longer you wait before investing, the harder it gets. Time is your best friend. If you don’t give your money enough time to grow, it will get more and more difficult to reach your goals.
Understand the miracle of compounding. Let’s say, one person invests $100 every month for the next 5 years and another person invests $50 every month for the next 10 years, the second person would be richer. The first person would be at $7,487.17 while the second one would be at $9,821.83. A difference of $2334.66.
Inflation reduces the value of your money every day. It stays at around 6% per year and any investment that gives you a lesser rate of interest than this is helping you lose money. With this point I would like to specially mention FDs or Fixed Deposits, they lock in your money with a return of about 4%. Hence, the money you have at the end is effectively much lesser than the amount you started with.
Don’t invest in things you don’t understand. Whatever be the newest trend in the market, our goal with investing should be whatever lets you sleep peacefully at night.
Invest money consistently every month. The last mantra is consistency. Try to grow it by 10-15% every year and you will be good to go.
Now let’s discuss how are we going to achieve the 10-15% of returns on your investment every year.
Health Insurance: This one is at the top because medical expenses can pile up quickly and make you lose all the progress you made in a matter of days. Most people don’t have the risk appetite or margins to lose around $50,000 in less than a week, this is by far also the reason that pushes many class families into poverty. Covid made this evident to the world. This is one of the most essential things to invest in for you and your family. Don’t risk it.
Your Home: If you plan to stay at the place for less than 5 years, it is always cheaper to rent it than to buy. 5 years won’t be able to give you any substantial returns on the cost of the place. Your home is not an asset, almost always, it is a liability. Don’t try to buy the most expensive one you can bag, go for something comfortable that still leaves you with some money in your pocket.
Another way to get a home is to Mortgage it. You deposit a fraction of the cost of the real home, say, around 20%, and then you don’t pay the rent and neither receive an interest. This won’t help the money grow but escapes you from the rental cycle for a few years (till the time your lease is due).
Rental Real Estate: Investing in commercial lands for this property provides returns through two routes — one is rent and the other is capital appreciation. Commercial real estate leases are generally longer, thereby helping you with the stability of your cash flow. It is fairly easier to get commercial lands to be rented out and all you need to take care of is make a judicious decision in terms of location, for if it is closer to the city, the pollution may become a problem and if it’s too far, then logistics will make the costs pile up. Choose a place that makes sense with both aspects in mind.
Equity: Invest in Index funds, select stocks and small cases. All of these investments should be made directly by doing your own research. Do not rely too much on mutual funds managers, for all they try to do is beat the market, which honestly speaking is much harder than it sounds since nobody, trust me nobody, can predict the market. These investments won’t give you an exact 15% return every year too, but over 15 years the returns would average out at 15% per annum.
Retirement plans: Investing in a retirement plan will help you save on taxes now and when you take out the money. Choose your retirement plan keeping some factors like hidden costs, tax benefits, investing period and guaranteed returns in mind. Also, check if they have some bundled up insurances because many retirement plans these days provide this benefit too.
That’s it, folks.
Always remember to keep some small amount of money in cash or savings account. The other forms of investments discussed, though beneficial in the long run, cannot be liquidated easily and we don’t want you to lose out on any investment due to any sudden expenditure that came up. This savings amount will be based on your needs, whether you are single or have family responsibilities. This emergency fund can be equal to whatever amount makes you feel secure, however, we suggest it be an amount that is equal to 6 months of your monthly expenditure.