Looking for Passive Income Sources? What to Invest in Your 20s?
When it comes to investing, it is always best to start as early as you can. Why? It is simply because the earlier you begin, the more is your earnings. But of course, if it’s just now that you’ve known the wonders of investment or perhaps, have the courage to start while being a young professional, it is never too late. You always have the chance to become a successful investor. But, what are the best investment options? Are there any particular investment that is best for everyone who is in their 20s? Well, there are two. Based on a survey conducted among young Filipino professionals, investing in real estate and stock market works perfect for them. They have become their highly reliable passive income sources while having a full-time day time job. Here’s why.
Why Real Estate?
● Capital Appreciation
Capital appreciation simply means the increase of the property or asset’s value in comparison to capital depreciation, which is the decrease in value.
If we say cars, gadgets, and the like, they are not considered investments because their value decreases through time. You become the loser in the end. Say for instance, you buy a Smartphone now that costs 20,000 pesos. Later on, 3 to 5 years after, new versions were out in the market and it’s current value becomes 10,000 pesos. Just imagine how much you lose.
But if you invest your money in things that appreciate in value as time goes by, the satisfaction that you feel in terms of money is long-lasting. For instance, you buy a house and lot in one of Baguio City’s premier locations that’s worth around 1 million pesos today, which becomes 3 million pesos in worth 3 years after. That’s a big ROI there. It is possible that your capital will be tripled in value. But of course, the market value of your property depends on a lot of factors aside from its location.
So, would you go for capital appreciation or capital depreciation?
● Cash Flow
What is cash flow? It is the amount of money you get from a rental property per month after you deducted all the paid expenses. Expenses would pertain to electricity, telephone, water, maintenance, so on and so forth.
Now, talking about rental property. Another technique that you can use so you get the most out of your investment is to have it rented or leased. So for example, you purchase a house and lot to serve as your townhouse in Baguio City but since you only go there once in every 3 years, the best thing to do is to find a tenant with a 3-year -term. The same applies when you have a condominium in Baguio.
The good thing about rental properties is with their cash flow as it increases over time without taking away any from your capital or principal investment. It goes up through time because rental fees increases with inflation while your mortgage due remains the same. Sooner or later, you will be able to pay off your housing loan and your property’s cash flow will go up outstandingly.
● Highest Growth Potential
Over the years, Philippine stocks have been consistent in earning more compared to bonds. This is considering the regular highs and lows of the market. Say for instance, you invested in stocks during the 1920s. You bought a 100 peso worth of stocks from one of the most established companies. Now, during this time, the average interest rate per year was 10 percent compared to bonds with 5 percent. Given that you have been consistent with your investment up to this day, you will surely earn big time in stocks than bonds. That is how amazing it is. Most of them time, bonds offer a lower interest rate compares to shares and stocks. So, I’d say you go for stocks investment.
● Ride with Ups and Downs
So you may realize that it sounds good to possess more stocks, however advertise downturns may in any case make you anxious. The features can be frightening. Keep in mind this: It might be excruciating for some time, yet in the event that the share trading system carries on as it has over long stretches, you ought to in the end be in an ideal situation. Considering it along these lines may help as well: Losses are just on paper unless you offer your speculations. In the event that you are enticed to offer investments for sale when they are down, advise yourself that you are putting for a period far later on. Attempt not to let fleeting unpredictability cause you to move far from stocks. Likewise, in the event that you spare consistently and keep on contributing amid down business sectors (and the business exhibits the sort of long haul development that it has verifiably), you will be adding to your reserve funds amid those business plunges, or "purchasing low." When the business recuperates, you may be stunningly better situated for development.
● No Need to Invest Everything
I’d say that a proper blend of investments ought to be in light of your time horizon, budgetary circumstance, and resilience for danger. However, those people who have longer investment horizons ought to have a huge, comprehensively broadened stock investment exposure.
Chances are you need stocks to sufficiently spare to carry on with the life you need in retirement. In this way, be careful with contributing too conservatively. Get used to riding the high points and low points of the market. In the event that you are contributing for the long haul and sparing consistently, a downturn can even help support your investment funds on the grounds that you may be purchasing shares of a stock at lower costs. That is the influence of having quite a while to develop your cash. Also, on the off chance that you are uncertain of what to do, consider a managed account like mutual funds.
Would you like to know your investment options now? For real estate, feel free to contact us for more details, while for stocks, I highly recommend that you join Bo Sanchez’ Truly Rich Club for expert guidance and excellent techniques.