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Sunday, July 25, 2021

How and how much you can earn on Investments with Profitability and Methods – Complete Guide 2021

There is no point in keeping free money. Inflation will devalue your capital every year, besides, you will not be insured against shocks of various kinds, due to which the currency can devalue by + 100%.

Investing free funds is a smart move that provides a stable income and protection from devaluation. Below you will find many examples of how much you can earn on investments per month, where you can invest and what surprises an investor may face.

What are investments and how to make money on them

Investment ( from the English. Investment – investment, contribution, capital investment, capital investment ) is an investment of funds somewhere with the expectation of profit in the future.

Investing ( from English Investing – making an investment, investing ) is the process of making investments. In simple words, investment is an activity, a process aimed at choosing an object for investment (stocks, bonds, bank deposit) and transferring funds to an entity (bank, securities issuing company, state) representing the investment object.

In the 18-19 centuries, European young gentlemen began to give preference not to starting their own business, but to increasing the already existing family capital, that is, they began to invest. Investing in order to keep them profitable is very popular in developed countries.

Most European families keep their savings and give away their savings to investment funds; in the United States, 80% of citizens have company shares and bonds in retirement accounts.

It is necessary to distinguish between the concept of investment and speculation, although both involve investment activities. Speculations are investments for a short period of time from 1 day to several weeks, and longer-term investments are called investments.

It is impossible to imagine a modern economy without investment. Over the past hundred years, the science of investment has come a long way in its development.

Everyone can invest in :

  • Keeping funds in a bank deposit with a fixed interest rate;
  • Acquisition of shares, that is, the purchase of a part of the issuer’s business;
  • Purchase of bonds (government debt of states);
  • Investment in PAMM-accounts (transfer of capital to trust);
  • Acquisition and storage of precious metals (gold, silver, platinum), including compulsory medical insurance (unallocated metal accounts – analogous to ordinary bank accounts, but instead of currency, the balance is calculated in grams of gold, silver, palladium or other precious metal);
  • Purchase / sale and leasing of real estate;
  • Investing in startups – “start-up” companies just starting their activities;
  • Private lending, transfer of funds for use to third parties for the payment of an interest rate by them.

In investing, there is an inverse relationship between risk and potential earnings. The more reliable the direction, the lower the yield. Exceptions do happen, but rarely.

How much to start investing with

It is impossible to make money on investments without investing anything. To understand what an investment is, it is enough to have a couple of hundred dollars with you . And to feel and feel the profit, you should invest at least $ 1000 .

The laws of the market are such that the more you invest, the more opportunities open up for you and the more potential profit in the future.

For instance:

  • With a capital of 100,000 rubles, you can invest in shares, open a deposit in a bank or a small home business for housewives.
  • Or take 10 million rubles and buy a share in an investment fund, purchase a franchise for a ready-made business.

But these numbers should not scare you; on the contrary, they show what you can achieve. After all, no one starts investing immediately with huge amounts.

So, for example, you can invest $ 300 this month in a PAMM account manager or BMW shares , next month another $ 300 , and in the fourth month you can already invest money not from your pocket, but from the profit received from the first investment ( reinvestment ).

Now you need to understand how much money you can make from investments.

How much can you earn on investments

There are no specific amounts, it all depends on the chosen method. Below we will consider the most popular and promising options for investing money. For example, by investing money in conservative securities, you can get 15% per annum. But it will be a guaranteed profit with minimal risks.

But investments in startups can bring several hundred or even thousands of percent of profit, but there is a high probability of losses and that the company will not develop, which happens in most cases.

On average, a novice investor can expect a profit of 10-25% per year from the amount of his invested capital. This is possible by investing in conservative and sustainable ways, rather than risky and aggressive ones.

There is no final ceiling on earnings, it all depends on your ambitions and aspirations.

Some methods are able to bring more than 100% per year (examples will be below), and for most investors this is not enough.

An example of real return on investment

A little higher in the article, a specific figure was mentioned – $ 1000, from which you can really start earning tangible profits. Let’s say you decided not to risk it and put this amount in the bank without interest capitalization at 12% per annum. In a year, the net profit will be $ 120 . After that you reopen a deposit for a year, but already in the amount of $ 1120, the profit will already be $ 134 .

If so far the profit figures are not impressive, then let’s calculate how much you will receive in 50 years. In three years, the capital will already be $ 1,400, in 10 years your thousand dollars will turn into 3,100 . And in 50 years – 289 thousand dollars!

But if you took interest every year and did not reinvest it, then the profit in 50 years would be only $ 6,000.

It was the capitalization of interest that helped to multiply the initial capital by 289 times.

Benjamin Franklin knew this principle by putting $ 5,000 in the bank. But with one condition that it will be possible to withdraw money only after 100 and 200 years. As a result, in the first hundred years the amount was already $ 500,000, and in 200 years – $ 20 million. The President bequeathed this money to the public needs of Philadelphia and Boston.

Few people want to wait 50 years and use their earned money only in retirement. There are ways to speed up the process:

  • Open a deposit with an increased percentage of profitability;
  • Increase capital every month.

The ideal option would be to open a deposit at 20% per annum, and report another thousand dollars to the account every month.

If it is not possible to report on a thousand dollars, then consider another more accessible example.

We still have the same $ 1000 as starting capital. We open a deposit at 7% per annum with interest capitalization, and each subsequent month we report $ 100. At the end of five years, you can increase this amount to $ 139,000 . The result is really impressive!

But the most important thing is that this way of earning does not require any effort.

How to make money on investments on the Internet

There is a wide variety of ways to make money online, but only a few of them are capable of generating stable profits with minimal risks. Here are examples of some of them:

  • PAMM account – the client invests money in a trader who trades in the foreign exchange market, receiving a small commission only from the profit. With a moderately conservative trading strategy, you can earn 100-200% annual profit here.
  • ETF funds – investing money, the investor acquires a part of the finished stock portfolio. For novice investors, this may turn out to be a profitable offer, since you do not need to delve into the specifics of the stock market on your own.
  • Stocks, bonds and other securities – you can earn both on dividends and the subsequent sale of securities when they rise in price. How much you can earn on investing in stocks with examples, you can find out below.
  • Trust management – an investor invests his money in a trader or a company that trade with these funds in the financial market or carry out any financial transactions.
  • Investments in startups and other off-the-shelf businesses.

How to make money on investments offline

The most common way is to invest in real estate, there are a number of advantages here:

  • Can be rented out for passive income;
  • Real estate is growing steadily in value from year to year.

In addition, you can invest in starting your own business. So you can completely control your money and make plans for its development.

How much money does a bank deposit bring?

Opening a bank account and depositing money on it at a low interest rate is the easiest and most reliable investment method. True, from the point of view of profitability, it cannot be called attractive:

  • In the United States, income fluctuates between 2-3% per annum, depending on the bank, the volume of the deposit and the term of placement.
  • The Eurozone is about the same situation as compared to 2008, when the rate exceeded 4%, it decreased several times;
  • Japan is the same situation, but rates have been around zero for a long time. There was a period when they went into the area of ​​negative values. At the time of this review, the current interest rate is 0.32067%. The Bank of Japan website provides details of the dependence of the rate on the term of the deposit and the amount deposited;
  • China – the rate is 0.35%. Since the first half of the 2000s, it has not risen above 1%;
  • India – the situation compares favorably with other countries. For deposits with a maturity of more than 5 years, the rate exceeds 6%;
  • Russia – give a relatively high percentage, with a long-term placement there are options with a yield of about 6-7.5% per annum. If the deposit is in dollars, there are offers with a yield of up to 1-2% per annum.

The logic is simple, by offering high interest rates on deposits, banks are trying to regain customer confidence and attract money.

The low rate in the EU and a number of other countries is explained by an attempt to force banks to lend to the population more actively, which should stimulate the economy.

As for how much money you can earn on a bank deposit, you can even estimate the profitability of a deposit in Excel (do not forget about the compound interest formula). In the first example, the investor invests 50,000 rubles. at 8% per annum.

In 100 years, the account will have almost 110 million rubles. True, there is no guarantee that during this time the national currency will not devalue, as it was during the collapse of the USSR (then, too, no one believed in it), another default would not happen.

The value of the ruble during this time is guaranteed to change, there are fears that it will not be for the better.

In the case of a deposit in foreign currency, the yield is lower due to significantly lower interest rates. So, with a deposit of $ 2000 and an annual return of 2.0% in 100 years, the capital will slightly exceed $ 14,000, excluding reinvestments.

Both examples show that bank deposits are not breaking records for profitability. It is chosen as a conservative instrument in the investment portfolio. It is simple, convenient, and besides, the state insures deposits for a certain amount.

Another reason for choosing a bank is low financial literacy. Some consider the stock market to be a hoax and view deposits as the only reliable method of investing free funds.

Also, a bank deposit is convenient because it is essentially an operational reserve – money can be quickly withdrawn from it if necessary.

How much can you earn on promotions

If an investor had invested $ 5,000 in the S&P 500 index (or rather, in the shares of the corresponding ETF that copies this instrument) at the beginning of 1993, then by the end of 2019 the capital would have grown 12 times. Average annual profitability is about 10% .

For comparison, at the same distance, a bank deposit with a yield of 2.5% per year would increase $ 5000 to $ 9270 . That is, over the long run, the bank deposit gave an income of $ 4270 compared to the $ 55842 generated by the growth of the S&P 500. The stock market gave a 1207% higher return.

You can make a profit both from dividends and from the price difference between buying and selling shares.

There is no point in proving the success of this approach – the names of investors practicing this method are known all over the world: Warren Buffett, Benjamin Graham, John Templeton, William J. O’Neill, John Bogle and many others, regulars on the Forbes list.

How to start investing: 4 main principles

Any investor has one common goal – to achieve financial independence and earn enough so as not to feel a lack of finance. But without prior preparation, this business is doomed to failure.

It is not enough to have a lot of capital for a successful start. A certain baggage of knowledge, skills and experience is required. Without this, most are stumped and lose their money.

Principle 1. Knowledge is required

Nobody gets into the water if they can’t swim. Nobody will sit down to fly a plane if they don’t learn to be a pilot. So it is in the field of investment.

Even if the business seems to be 100% successful, you cannot invest in the blind without understanding the basics.

You don’t need to be an economist or financier with a higher education, but at the expense of the availability of the Internet to learn at least the basics.

Principle 2. Do not give in to emotions

Don’t think that professional investors are some kind of robots. Everyone is worried that they might lose money. But only a professional knows how to control his emotions and not succumb to fear, which will interfere with a sober assessment of the situation and make the right decisions.

Principle 3. Be able to objectively assess your capabilities

You don’t need to set yourself high and sky-high goals. Such as making a million in a day or a week. This only happens in fairy tales. You need to realistically assess your capabilities based on the available means. And draw up a clear and detailed plan of action, which in the future needs to be followed step by step.

Principle 4. Prepare mentally for losses

And they will definitely be. This is an integral part of an investor’s job. Even Warren Buffett, with his vast experience, was losing millions on bad deals. And all because no one can predict the future 100%.

The main thing is that profits exceed losses. And treat losses like regular work. Many people break down from a psychological point of view and cannot continue, because it is too painful for them to perceive the loss of money.

7 golden rules for investing

Compliance with 7 simple rules will save you not only time and nerves, but also money.

  1. Do not invest borrowed funds . You need to invest only your own and free money. Not borrowed in any way. If something goes wrong and the investment does not pay off, then you will also owe money to the lender.
  2. Don’t invest your last money for vital needs. If you lose them, you will have nothing to live on. There should always be an airbag that will help you get back on your feet even in the event of a complete loss of capital. All of the major Wall Street traders lost their fortunes several times, but then earned even more. But if they invested the last money, then after that they would not be able to get back on their feet.
  3. Make an investment plan . Without a clearly defined plan of action, not a single thing, even the simplest, will succeed.
  4. Always increase your investment capital . For example, having opened a deposit, replenish it every month for a certain amount. The more investments, the more profit will be at the end of a certain reporting period. Experienced investors replenish their capital and increase it every month.
  5. Let go of emotions . Fear and excitement are the main enemies of the investor, they do not give a sober assessment of the situation and make the right decisions. Composure and strict discipline are the main keys to the success of any business.
  6. Conduct regular profit and loss assessments .
  7. Diversify your investment portfolio and distribute capital between assets with different levels of risk.

Conclusion

The return on investment directly depends on the accepted risk. The higher it is, the higher the potential, miracles do not happen and it will not be possible to find a direction that with 100% probability will give 1000% profit per year.

Investing should be boring but profitable.

If you constantly experience vivid emotions – then fear, then euphoria, then you are doing something wrong. A real investor clearly knows what goals he plans to achieve and where to invest money in order to achieve them. The risks, of course, remain, but through planning they are minimized. As a result, it is quite possible to reach a good% per annum.

It’s never too late to start. If you haven’t joined the ranks of investors yet, now is the time to do it. It is not necessary to immediately invest large sums, it is enough to start with at least $ 300-2000, depending on the direction.

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