What are some of the most profitable investments you can make as a beginner investor? Do you listen to the advice of well-meaning friends and family, your financial advisor, or the investment courses and books you’ve read by financial gurus? You don’t want to choose the option that leaves you worse off than where you started. But with all the investment noise out there, which choice is the best one for you?
Table of Contents
- Determining What Type Of Investor You Are
- Investment Goals By Age Group
- Determine What Type Of Returns You Want
- Capital Gains or Cash Flow?
- Invest In Yourself
You’ve heard of all the lucrative options: bitcoin, cryptocurrency, stock markets, real estate, mutual funds and index funds, and commodities like gold and oil. For each one, you’ve heard of someone who made a fortune and someone who lost a fortune.
You may have heard that cryptocurrency peaked in 2013, and that crypto needs an “ETF” to make it easier for people to invest in it… and right now, its future and the future of bitcoin remains highly speculative. If these terms describing crypto and bitcoin are foreign to you, you might be hesitant to invest in it at all, especially since some say “it will never make it into the mainstream financial system.”
If you’re more conservative, might be considering historically proven options like mutual funds and real estate. When you invest in mutual funds, you can have a diversified portfolio with minimal investment requirements and liquidity. However, you may need to invest a large amount of cash in your portfolio, pay high fees, and have little transparency in your holdings. Some investment options are more liquid, others more volatile.
Understanding all the terminology, the risks involved, and the amount of return can be exhausting for a beginner investor. You’re probably thinking an easier option is to copy what I do because you like my results. If you want to be a millionaire or billionaire, find out what rich people do and do the same, right? I disagree with this line of thinking.
The first thing you need to do is decide what type of investor you are. That’s what will determine what you should invest in.
Watch this video about profitable investments for beginner investors.
Determining What Type Of Investor You Are
When you can determine what type of investor you are, you can decide what are profitable investments for you.
But before you even decide what investments are best for your situation, let me tell you that what low and middle income people invest in are different than the investments of high income people.
When you reach a certain level of income, the investment world opens up to you, and you have a lot of investment options that you haven’t even heard of before you became wealthy.
So first, determine what kind of investor you are. It’s like deciding what kind of car you want to buy. Start with general questions and work your way to more specific ones.
Do you want to buy a car for leisure or business? Who will you be driving and where will you be driving? You might want a SUV to take your family to places. Or you might be looking for a sports car for some weekend fun. And even if you are looking for a sports car, you have many options for model and make of car. Choosing investments are the same as choosing a car.
The type of investment you want when you’re younger will be different than when you’re older. What you want when you’re 20 to 30 years old is different than when you’re 40 to 50 years old. It’s a difference between growth versus security.
When you’re younger, you want growth because you have the time to ride out the ups and downs in the market. If you have a family, you’ll need to put part of your income into supporting your family, rent, or a mortgage, in addition to setting income aside for investments. When you’re older, you’ll want to protect your capital. You won’t have time to watch an investment go through ups and downs. Instead, you’ll want security because you don’t have the time for long term growth, or long term risks.
Investment Goals By Age Group
When you’re in your 20s, you may have student loans to pay off, and you’re just beginning your career. It is also the time to start planning for your retirement. Ideally, you want to set aside 6-10% of your income investments, but if you can’t afford that, set aside what you can. These numbers are arbitrary. You have time on your side, so you have the potential for the most growth. You can take more risks in aggressive investments, and weather ups and downs in the market.
When you’re in your 30s, your goal should be to set aside about 10-15% of your income so you’ll have money saved for your retirement years. You want to be maximizing your contributions, while at the same time, making a plan for paying for your mortgage or other debts. Again, these numbers are not hard and fast rules. Your investments depend on your situation and the type of investor you are.
When you’re in your 40s, you’re at the peak of your earning potential. In this age group, you may be paying off a mortgage, and setting aside savings for the college education for any kids you may have. You are focused on investments for your retirement.
When you’re in your 50s and 60s, you’ll want to be setting aside 12-15% of your income. At this stage, you are most aggressive in your saving and having security. How much you save will define your lifestyle for the rest of your life. It means you’ll be more conservative in your investments, putting money in more stable funds. You can’t afford to take risks with ups and downs in the market the way that you could when you were younger.The amount to invest depends on your income level, how much risk you're willing to take, and other financial considerations you may have, such as your debts and expenses. Click To Tweet
So if you’re looking for straightforward advice on the most profitable investments for you, then you’re probably looking for an easy answer. You should spend time looking for some clarity as an investor. What matters more to you? Growth or capital gains? Security or dividends? What is your risk tolerance?
To make an analogy, I can’t give you advice on what car to buy if you’re not sure why you want a car or what you’ll do with it when you have it. But say you do know what type of investor you are. What’s next?
Determine What Type Of Returns You Want
The next step in finding the profitable investments that are best for you is deciding if you are a cash flow or capital gains type of investor. What’s the difference between the two?
Cash flow investors like to keep their investments for a long period of time so they can continue to collect a regular income. For example, if you own a stock, it can generate money as a dividend.
Capital gains investors get an income when an investment is sold at a higher price than what they originally paid for it, such as when a share of a stock is sold.
Should You Invest In Capital Gains?
For example, if you’ve watched a fix it up and flip it real estate TV show, then you’re familiar with capital gains. You’re buying and then selling for a profit. It’s the same concept for buying and selling stocks. You make money when you sell an asset or investment. When you make money, that’s your capital gain. If you lose money, that’s a capital loss. For example, you sell a house for a lower price than you paid for it.
If you are a capital gains investor, you are always buying and selling to make money. There are risks to this strategy. If the market takes a nosedive, then you’re stuck with inventory you can’t sell, whether it’s real estate or stocks. It’s a gamble. The rise and fall of the market can determine if you win or lose.
Should You Invest In Cash Flow?
A cash flow investor purchases an investment and holds onto it to make a regular income. That regular income is your cash flow. For example, you buy property, fix it up, and rent it out. You will have a positive cash flow if your monthly rent exceeds your expenses and mortgage on the rental property. Similarly, if you purchase a stock that pays a dividend, then you will generate money for as long as you own the stock.
Unlike capital gains investing, the short term ups and downs of the market don’t affect your investment. You’re looking at long term trends, which means you will still have cash flow even in bad times.
Capital Gains Or Cash Flow?
Whether you prefer capital gains or cash flow depends on how much control you want to have over your investments. I don’t like stocks. Instead, I prefer real estate and investing in businesses. With stocks, I can’t call the CEO and tell him or her that I don’t like where the money is being spent for the company. I don’t have any control.
I also don’t like the speculation involved in stocks. You need to constantly keep watch over market swings to determine the best time to sell and make a profit. But I have a friend who is doing very well with stock investments. It just depends on your preference. With cash flow investing, I know I can consistently get 10 percent back every year so I know it will take ten years to get my money back on my investment.
Real estate investments offer cash flow if you invest in income properties. For example, I can add value to commercial real estate to increase its value or by having a tenant. This is just my preference.
The investments you want depends on what returns you want and where you are in life right now.
Invest In Yourself
One common mistake beginner investors make is looking for profitable investments only in the marketplace. They forget that investing in themselves is just as important as putting money into investments.
If you’re making less than $100,000 a year in income right now, invest in yourself by developing your high income skills. These are skills that command a high, five-figure monthly income in the job market. Some of these skills require a degree while others require you to take a course to develop a specific skill. Some examples of those skills are closing high ticket offers, copywriting, platform speaking, and consulting.
When you focus on developing your skills to increase your income, you will also change your lifestyle. You will have more income to invest in your retirement and other future savings goals, such as buying a house. Your goal is also to increase what you can afford, instead of focusing on saving to pay down your debts.
Having a high income skills will also mean more career options because your skills are in demand. If a work situation doesn’t work with one employer, you can find another. For a skill such as closing or copywriting, you can apply it to any industry to make an income. You will have a lot more flexibility, because you will be able to work from anywhere in the world, as an employee or a freelancer.
How To Invest In Your Career Or Business
If you’re making less than $250,000 per year in income right now, then your profitable investments should include yourself. Upgrade your skills, your knowledge, your skill set, and your earning ability. Here’s how.If you’re making less than $250,000 per year in income right now, then your profitable investments should include yourself. Click To Tweet
For example, you are a consultant making $250,000 a year and you need more cash. You take a program that costs $10,000 and the program teaches you how to run a workshop instead of working with your clients one-on-one. After the program, your workshop makes you $50,000. Where else can you get such a high return?
You got back more than 50% from your investment. If you invest in yourself and having a high end career, that skill stays with you. I like to invest in workshops or hire advisors to invest in myself. This is one type of investment that applies to you, no matter what your age.
You can learn how to be more effective at running your business. You can learn marketing or how to acquire customers. If you spend $3 and get $5 back for each customer, that’s a 100% return. You can’t get that from a passive investment.
Now that you’re making six figures from your business, then start investing in something you understand. Don’t get greedy or think you are missing out if you aren’t investing in the latest trends.
One of the most successful investors in the world, Warren Buffett, said, “Investing in yourself is the best thing you can do. Anything that improves your own talents; nobody can tax it or take it away from you. They can run up huge deficits and the dollar can become worth far less. You can have all kinds of things happen. But if you’ve got talent yourself, and you’ve maximized your talent, you’ve got a tremendous asset that can return ten-fold.”
So if you want to invest in the most profitable investments, start with yourself and developing your skills.
When you are a beginner investor, choosing the most profitable investments for your situation can be an overwhelming task. An investment option that may be lucrative for your friend may not be profitable for you. Some people are willing to take risks in stocks or bitcoin. Others prefer more conservative options, such as bonds.
First, determine what type of investor you are before you decide what type of investments you want. When you are younger, you may have less income to invest, but you can take more risks because you have the time to weather the ups and downs of the market. When you are older, you are at the peak of your career and have more to invest, but you can’t afford the time to take as many risks.
Second, you want to decide what type of returns you want. Capital gains investors make money when they sell their investment, such as stocks or real estate. If the market is doing well, they make a profit. If the market falls, they lose money. Cash flow investors buy an investment and hold onto it to make a regular income. This income is not affected by the market and is a long term investment plan.
Third, when you’re not sure what profitable investments are right for you, always invest in yourself. Develop a high income skill to increase your income level. The investment options available to you if you are low, middle, or high income change as your income changes. A higher income will also mean more security for your future.
One of the best investments you can make is in yourself. You can do this by learning a high income skill such as closing. You can learn more about this skill in our 4 day training. Click on the banner below.