This is a guest post by KC Lau from www.kclau.com.
I am frequently asked by a lot of readers about where they should invest their money. I often tell them that there are two ways by which they can invest their money wisely. These two investment options aren't new, and you probably have heard them before. The first option is business, either a self-owned business or someone else's business. The second option is real estate; these are properties which can either be for residential or commercial purposes. Lands, apartments, condominiums, housing complex, farms and warehouses are examples of real estate properties.
I’ve created an article and a video tackling the ins and outs of real estate investing before. For now we will be discussing about investing your money in stocks. Investing in stocks makes you a shareholder, and grants you partial ownership of the business.
Invest your money not where it would be kept, but where it would generate revenue
In this age where the worth of paper money decreases on a daily basis, I receive a lot of questions requesting for my views about investing on gold and silver. I acknowledge the importance of these valuable metals, and I understand that it can produce a big turnover when prices spiked up. It has been tried and tested before. You have probably toyed on the idea of converting some of your cash equivalents into gold coins and silver, and then use these metal bars and coins in embellishing your safety boxes. But is it really wise to invest all your money in these precious metals?
The simple answer is – no. These are valuable metals, I know, but these won’t yield more value. My standpoint will always be: If you would invest your hard-earned cash, you should invest it on resources that will generate more cash. In essence, corporations can make competitive products and commendable services by using the money provided by investors. All these goods and services they create make our everyday life easier. It improves our well-being through health products. It powers our communication system. It propels us forward and lets us reach our destinations. It even enhances the way we learn and do research.
One of the most successful investors of our time often talks about how stock investment can shatter the dog-tired concept of investing on gold. Essentially, stock investing isn’t just about buying an asset that generates income. It’s investing on goods that benefits many individuals.
It’s More Difficult to Build a Successful Business than Own a Share of it
It doesn’t take a genius for you to know how hard it is to make a profitable business. Initially, businessmen work day and night. Their efforts are sometimes based on risks – trial and errors. Ultimately, if you already have an established business, the rewards are endless. What I want to reiterate is that starting your own business warrants substantial effort, money, time, common sense and great sacrifices.
Now, comparing the amount of hardships and risks it would take to build a corporation than buying a share of an already successful business, I know one thing. Imagine how easy it is to buy a stock of a profitable business in your country. Think about the comforts of not being required to be present in the company’s office every day; of not having the need to make reports or fix business problems that may arise. No long, boring meetings. No discussions with the boards. You stay in the comforts of your own home or office cashing in dividend cheques. Even that miniscule task can be taken care of if you’re using a pledged account.
It’s Flexible and Easily Tradable
Good thing about investing in stocks is that they are highly flexible, and can easily be converted into cash. You can do the buying and selling virtually anywhere; provided it’s the right trading time and you have internet access. In times that you can’t connect to an internet provider, a stockbroker or an agent can be reached through phone.
I’d go back to comparing investing with managing a business. If one of your businesses fails, you’re doomed. Some people just don’t have the heart to close down a business because of emotional reasons. Either because the business has been significant to their family or because of fear of dealing with the many hassles of starting all over again. I’m not pulling you away from being an entrepreneur. I just want to point out that compared to running a business, stock investing is favorable in many levels – flexibility, liquidity and all. Unlike a business that can get you stuck, changing switching into different stocks is easy.
Let’s say for example that your investments in company #1 is quite unsuccessful; what you can do is sell your shares, and look for a much cheaper stocks you can buy from another company. Investing in stocks gives you a more flexible option of dispersing your money into different companies, trades, and even to different countries. Looking for a number of successful companies to invest in – you don’t need to look very far – we have a wide range of great corporations in this country alone. In the current market, a lot of firms allow investors to engage in stock buying in other countries.
It Can Be Done From the Comfort of Your Home
If you have read my article about real-estate investing, I have pinpointed there that property investing is for an outgoing person – the socializer. These are people who love the idea of visiting properties, meeting new people and building rapport with them to seal the deal. On the other hand, stock investing is for the quiet thinkers. Those people who would rather stay home, read and learn.
Suffice to say that when it comes to stock investing, you don’t need to be far from home. Buying and selling can be done at home. You can search the internet for reports, wait for updates on the news. Having these portals is essential in conducting proper examination of how to invest and what type of companies are valuable.
Unlike having your own business and investing in real estate, you don’t need staff to pay and leaseholders to supervise. Truth be told, one of the many perks of investing in stocks is that the only thing you need to facilitate is your own time and resources.
It Provides Long Term Business Revenue
Some stocks that only worth a penny before, costs millions today. There’s a beer industry in the 70s, and if you purchased 100 shares from that company, your stocks will now costs more 1 million. That’s why it’s important to look for notable companies. They’re reliable and they’re more likely to generate big revenues.
Anyone can do it
A company that sells their shares makes it available to almost everyone who want to be a shareholder. Some countries may require minimum transaction costs and a limit in the number of stocks you can buy at a time, but anyone can buy their own share. Minimum costs per transaction becomes insignificant the bigger the number of stocks you buy.
Trade listing is being strictly regulated, thus it is possible to get all company information that you need from these business. You can get reports, annual analysis from the company’s websites or by paying a visit to their company’s location. It’s easy to buy stocks because of low initial capital required, and because of readily available information you can acquire from companies you are interested in.
Every Financially Successful Individual Are Most Likely Stock Owners
I know a lot of rich and famous people who put a big sum of their money in business and real estate. Rich businessmen either own shares from the business they’re running, or own a share from other companies, which entitles them partial ownership of other people’s business.
This is a guest post by KCLau. KCLau is the best selling author of Top Money Tips for Malaysians. His popular personal finance blog is one of the most visited websites in the financial blogosphere with more than 14,000 email subscribers. He also hosts regular and free financial training online featuring different financial experts. You can follow his latest updates by visiting www.KCLau.com.