This is article 2/8 in Part I of our series, How To Build Wealth and Grow Your Wealth Through Staking. We hope you learn something and enjoy it!
Click the button below to go back and read the first article.
Key Takeaways
1. Real estate
2. Stocks
3. Bonds
4. Mutual funds or ETFs
5. Cryptocurrency
6. Peer-to-peer lending
7. Business ventures
8. Precious metals
9. Collectibles
10. Annuities
No investment is a sure thing. Do your research and understand the risks before investing. It’s also important to diversify your portfolio, so you don’t have all your eggs in one basket.
Where to invest your money to build wealth
You can build wealth using many different investments. Some of the best options include:
Real estate: Property usually appreciates over time, and you can earn rental income from tenants. Plus, you can take advantage of tax benefits like deductions for mortgage interest, maintenance and depreciation.
Stocks: Investing in the stock market can be a great way to build wealth over the long term. 401ks and IRAs exist for that purpose. When you buy stock, you own a small piece of that company. If the company increases its profitability, the value of your stock generally increases too.
Investing in the stock market carries risk. Ask any investor what 2008 did to their portfolio. Do your research and diversify by investing in 10 or more different stocks.
Categories to consider are growth vs value, large-cap vs small cap, consumer staples vs discretionary, domestic vs foreign, etc.
Bonds: Bonds are debt securities. When companies or governments need money, they issue bonds. They borrow from people like you and pay a fixed rate of interest, which provides a steady income. Bonds are less risky than stocks, but generally provide lower returns. As people get older, they often own more bonds.
Mutual Funds or ETFs: Mutual funds and exchange-traded funds (ETFs) are a basket of investments that can be bought and sold as a single security. They can provide a way to diversify your portfolio and spread out the risk of investing in individual stocks or bonds.
It’s not uncommon for a single mutual fund to hold 75 different stocks or bonds. ETFs are low-cost indexes that allow you to invest in a specific sector of the economy. An ETF might be the S&P 500, telecommunications, financial services, or biotechnology companies.
Cryptocurrency: Cryptocurrencies like Bitcoin and Ethereum exist digitally. Transactions are cryptographically encoded and take place on a decentralized ledger, rather than on a centralized server. Crypto values can fluctuate wildly, but investing in the right cryptos can provide significant returns over time.
Proof of Stake cryptocurrencies, like ETH, MATIC and ATOM can be “staked” on a network to help verify transactions. In return for staking tokens, you are paid more tokens.
It’s important to note that cryptocurrency is a speculative investment. Be sure to understand the risks and potential rewards before investing.
Peer-to-peer lending: This type of investment allows individuals to lend money directly to borrowers, cutting out banks as middleman. Peer-to-peer lending is a common strategy used to generate yield on idle crypto assets. You can deposit your tokens into a pool on a decentralized exchange, like Uniswap or Osmosis.
Peer-to-peer lending can provide higher returns than traditional fixed-income investments, but carries substantially more risk.
Business ventures: Investing in a small business can be a great way to build wealth. Business owners can earn a significant return on investment, but it’s important to note that starting and growing a business requires time and can be risky.
Do your research and understand the industry and market before investing.
Affiliate marketing and e-commerce have become especially popular since they require minimal upfront capital and are managed from any internet connection.
Precious metals: Gold has been a traditional store of value for thousands of years and can be a great way to diversify your investment portfolio. It has a low correlation with other asset classes, which can help to reduce overall portfolio risk.
Other precious metals like Silver, Platinum and Palladium are also popular investments. One major downside is that you won’t likely generate an income from precious metals investments.
Collectibles: Some collectibles like art, rare coins, stamps, and vintage wines can be good investments. However, these investments can be speculative and difficult to value, or sell quickly. Collectibles require knowledge of the industry to make money.
Like precious metals, producing income from collectibles is unlikely and they are private. Ownership isn’t public information.
Annuities: An annuity is a contract with an insurance company that provides a guaranteed income in exchange for a lump sum payment, or series of payments.
Annuities grow tax-deferred and are sometimes thought of as an investment vehicle, rather than an investment themselves. They can be a good option for retirement planning.
Fixed annuities guarantee a rate of return, while variable annuities invest in mutual funds and don’t generally offer guaranteed returns.
No investment is a sure thing.
All have risks that must be weighed against the potential rewards. That’s why it’s important to diversify your portfolio and not to put all your eggs in one basket.
For a deeper dive be on the lookout for our next article on Alternative Investments. This includes more information on crypto, hedge funds, private equity, and commodities.
Frequently Asked Questions
- Begin early, the sooner the better
- Set clear financial goals and a budget
- Automate your investing, so it’s done for you
- Pay off high interest debt, like credit cards and title loans
- Spend less than you make
- Review your strategy and investments quarterly
The answer to this question depends on so many factors. However, the best investments to build wealth are:
- Stocks
- Bonds
- ETFs and mutual funds
- Real estate
- Cryptocurrency
- Business ventures
- Collectibles, like art, rare coins, and vintage wines
- Precious metals, like gold and silver
This is not financial advice. “Safe” is a loaded term. Does that mean preservation of principle, or preservation of purchasing power?
If “safe” means preservation of principle:
- Cash
- CDs
- U.S. treasuries
- Money markets
- Municipal bonds
- AAA rated corporate bonds
- Preferred stocks
If “safe” means preservation of purchasing power:
- Real estate
- Stocks and mutual funds
- Bitcoin and top tier cryptos
Yes! That’s why we love crypto. Find projects that help people, are scalable, are interoperable, have good tokenomics, and allow you to stake your tokens to earn staking rewards. Please do your research and consider the risks.
Investing in exponential trends is another aggressive investment strategy to consider. Industries that are set to grow from exponential trends are:
- AI and machine learning
- Internet Of Things
- Crypto, Web3 and blockchain
- Electric vehicles
- Robotics
- Renewables
- Genetic science
- Gaming
- Space exploration
- Savings account
- CDs
- Mutual funds and ETFs
- Rental real estate
- Bitcoin, if you’re comfortable holding your tokens in a hardware wallet. Never leave your crypto on exchanges or with centralized providers.
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