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Investing is about laying out cash or assets now, in the hope of more cash or assets returning to you tomorrow, or next year, or next decade.
Most of the time, this is best achieved through the acquisition of productive assets.
If you are the type of person that likes companies that are stable and gush cash flow for owners, you might be drawn to
If you prefer a more aggressive portfolio allocation methodology, you might be drawn to investing in the stock of bad companies.
Even a small increase in profitability could lead to a disproportionately large jump in the market price of the stock.
Real estate investing comes down to either developing something and selling it for a profit or owning something and letting others use it in exchange for rent or lease payment.
It can allow someone without a lot of net worth to rapidly accumulate resources, controlling a far larger asset base than he or she could otherwise afford.
Real estate can also be traded like a stock. Usually, this happens through a corporation that qualifies as a real estate investment trust or REIT.
Once you've settled on the asset class you want to own, your next step is to decide how you are going to own it.
If you decide you want a stake in a publicly-traded business, do you want to own the shares outright, or through a pooled structure?
Outright Ownership: You will buy shares of individual companies directly. To do this right requires a certain level of knowledge.
Pooled Ownership: You mix your money with other people and buy ownership in a number of companies through a shared structure or entity. The downside is a near-total loss of control.
Your decision can have a major impact on how your investments are taxed.
Choices include taxable brokerage accounts, Traditional IRAs, Roth IRAs, Simple IRAs, SEP-IRA, and maybe even family limited partnerships.
Three essentials for successful investing: Invest in things you understand with low fees and minimal taxes.
Taxes can take a massive chunk of your investments' future earnings, so minimize their impact as much as possible. With long-term investments, first max out your 401k, Roth IRA, and SEP-IRA, since they offer a tax benefit either when you deposit or withdraw the money.