Which asset can make you rich?

Mutual Fund. Business and commerce allows us to create wealth with the aid of making an investment our money with those who are on the path to creating wealth. ... real estate. ... Fine art. ... Rare coins. ... Interest Paying Bonds. ... Dividend Paying Stocks. ... Farmland. ... Real Estate Investment Trusts (REITs) More items...

saurabhbedage.medium.com - Top 10 Money Assets that can make you rich | by Saurabh Bedage

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Top 10 Money Assets that can make you rich

The secret to building wealth — Buy Assets and Avoid Liabilities.An asset is something that, in the future, can generate cash flow for you. Assets make money. Anything that takes money out of your pocket is a liability

What’s the key to building wealth?

it’s Multiple income streams.

At least that’s what millionaires will tell you. 65% of them have at least three income streams, and nearly 1/3 have 5 or more income streams. So if you’re still tied to your day job, and you’re serious about reaching financial freedom, then ditch the cars, jewelry, and luxuries. Instead, let’s look into spending our money on the ultimate status symbols: income producing assets.

1. Mutual Fund

Business and commerce allows us to create wealth with the aid of making an investment our money with those who are on the path to creating wealth. We can be investors in businesses of entrepreneurs, by means of investing in stocks of various companies. As the entrepreneurs and the managers run their organizations efficaciously and profitably, the shareholders get the benefits. In this regard, Mutual Funds are a excellent manner to build wealth.

But how do we know which stocks to buy, and when?

That is where taking professional help counts. They also take the advantage of a large corpus to explore more opportunities simultaneously. Like a balanced diet — we all need proteins, vitamins, carbohydrates, etc. Eating only one type results in some nutrient deficiency. Similarly, in a diversified equity fund you’re exposed to different segments of the economy, and also protected from the potential downside. Invest in a professionally managed, diversified equity fund and stay invested for long period to create wealth for yourself

2. real estate

Many of the Multi-millionaire who build there assets and become wealthy they become wealthy by investing in real estate or holding there wealth from real estate. Real estate investing may not make you wealthy overnight, but it can add zeros to your net worth in a shorter time-frame than many other traditional investments. For example, purchasing a fixer-upper house, rehabbing the property, and selling it for more can net you a significant windfall if you do it correctly. Just be sure to buy low, rehab smart, and sell fast. House flipping, as this process is called, is largely a math game, and significant profits can be made by those willing to take on the challenge. Another strategy that can help you add wealth quickly through real estate is by purchasing multifamily properties that produce significant monthly cash flow. This cash flow can be saved and reinvested into more deals, creating a domino effect that will allow you to exponentially grow your real estate portfolio.

3. Fine art.

Most wealthy investors don’t acquire fine art merely because they’ve fallen in love with the work. They know it has value. Fine art will always have someone who wants to buy it, and those who want to buy it understand its worth. They are not trying to bargain for every cent, which makes this a good investment. Alternative ways of investing in art are limited only by the human imagination. In Switzerland some 25,000 shareholders bough a $2 million painting by Picasso. The owners decide where the picture is to be exhibited and will decide when it is to be sold. It is unknown whether this tactic will prove advantageous to the investors. Another way to get into the art investment field is to buy shares in auction houses Sometimes fine art can even go in the asset box and generate a passive income. Some wealthy individuals have gathered enough fine art to open private galleries, or to lease their art to famous galleries.

4. Rare coins.

The super wealthy do spend a considerable amount of money on luxuries, at least $1.1 million each year, if CNN Money is to be believed. But this is actually a tiny fraction of their wealth. Furthermore, the luxuries they buy may include things like rare U.S. coins, which many use as a wealth preservation tool. One reason rare coins are a good investment? The market is comprised of historically significant items that are very limited in supply.

According to Michael Contursi, executive vice president of RCW Financial,

“The scarcity and exclusivity of many rare U.S. coins creates an environment for excitement where opportunities to purchase these items may only occur once in a lifetime. Ultimately, availability becomes more important than price. This puts an investor with holding power in a very powerful position not only to preserve principal, but also to profit based on the principles of supply and demand.”

5. Interest Paying Bonds

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Bonds are basically IOUs from businesses to investors. You invest a fixed amount into a bond, and the company agrees to pay you a certain percentage back. Of course, this is a simplification. You can purchase bonds from all sorts of entities, including:

Companies (aka Corporate Bonds)

Large, stable companies (Investment Grade Corporate Bonds)

Small, ultra-risky companies (Junk Bonds)

The federal government (Treasury Bills)

Sections of the federal government (Agency Bonds)

State and local governments (Municipal Bonds)

Foreign companies or governments (Foreign Bonds)

Interest rates obviously vary significantly, depending on your type of bond and the current interest rate environment. But in general, you can expect bonds to yield anywhere from 1–4%. Investors typically enjoy bonds for the stability of their fixed payments and the stability of the underlying price of the bond itself. While stocks tend to fluctuate wildly in price, the price of bonds is much more stable by comparison.

6. Dividend Paying Stocks

Now we’re getting to something with real wealth building power!

When you purchase stocks, many of those companies pay out a portion of earnings to shareholders on a regular schedule. These are called dividends, and ooh-wee let me tell you — There’s few things more exhilarating than a big fat check with your name on it, courtesy of your stock market investments. Typically, dividend paying stocks are the larger, more established companies. In fact, there’s a whole set of stock market darlings known as “The Dividend Aristocrats” who have earned their title by increasing dividend payouts for 25 consecutive years or more. (Currently, Proctor & Gamble and Dover Corp. are neck and neck, with 61 and 62 years straight years (!!) of dividend increases, respectively.) The percentage rate of dividends varies by company. If you’re an investor for example in EcoLab, you’re currently looking at 1.12% dividend rate. If you felt like juicing up those dividend yields, you could always move some money to a company like AT&T, whose annual dividend yield is 6.05% right now. Things get really exciting when you realize that for someone capable of living off $30,000 a year, a $496,000 investment in AT&T could fund their whole lifestyle!

Did we mention that if dividends represent your only income source, a married couple can earn up to $75,900 of dividend income a year without paying any taxes?

The easiest way to gain some dividend exposure is through index funds, like Betterment. Yep, index funds pay out dividends too, which makes sense when you consider the index includes these same dividend paying companies.

7. Farmland

You don’t have to be a farmer to profit off farmland.

39% of all farmland in the United States is rented or leased, so if you can’t grow an ear of corn to save your life, you still have a chance to get a little agricultural with your income streams. By purchasing a piece of agricultural real estate, you can then rent out your land to farmers looking to expand their operations. This allows the farmers to maintain their capital for other uses, while you collect monthly or quarterly rent checks. Of course, you can’t just buy a random piece of real estate and hope to start growing crops on it. (Sorry, your backyard garden in city limits won’t cut it.) In fact, the land’s soil conditions have to be right for commercial crop production, and nearly all farm-able real estate is already accounted for. In fact, premier pieces of farmland, like high quality cropland in the middle of Iowa’s corn belt, can sell for $10,000 per acre. Less prime pieces of farmland can be purchased for $1,500 to $3,000 per acre, and can often rent for $50 to $250 per year. Plus, renting farmland can provide your portfolio with some strong diversification, since agricultural boom-bust cycles tend to have very low correlation from what us city slickers consider to be the “regular” economy.

8. Real Estate Investment Trusts (REITs)

Ever dream of being a landlord, but the idea of tenant calls and plumbing fixtures has you running for the hills?

Enter REITs, the stocks of the real estate world. Real Estate Investment Trusts are companies which own, invest in, or manage income generating real estate properties. REITs trade on the stock exchange, and you can purchase them just like you would the share of any other company. Personally, I’ve invested in Vanguard’s REIT Index fund (VGSLX) for several years, which has yielded between 3–4% in that time. The coolest part? With the purchase of one share, I’m suddenly the landlord of residential rentals, commercial real estate, public storage units, and everything in between.

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By law, REITs have to distribute over 90% of their earnings to shareholders, which can lead to some seriously high dividend rates. You have to be careful though, as high yielding REITs tend to be extremely volatile. Want to get really crazy with it? You could buy REITs using 20% of your own money and 80% borrowed money. This approach does a decent job replicating the same leverage experienced when buying a rental property with a 20% down-payment. Around this time, it’s important to remember the gold rule of finance — there’s no such thing as increased returns without increased risk.

9. Timberland

Who says money can’t grow on trees?

When you own a timber operation, your money literally can.

As trees grow, they add more volume and therefor become more valuable for timber harvesting. In good soil, some timber species can grow as much as 3–4 feet per year and reach heights over 100 feet at maturity. These big trees can sell for big bucks! Sure, it takes a big of patience. Depending on the type of tree, from seed planting to maturity takes 15–30 years. Soft woods, such as pine, are ready for harvest in just over a decade, while hard woods like cherry oak or maple take the longest to mature. Bare timberland can be purchased for $100–500 per acre, and a mature acre of timberland can be harvested for $500–2,000 per acre. Certain tree types, such as Walnut, whose straight-grained wood is desired for furniture, veneer, and gunstocks, can sometimes produce over $100,000 of timber per acre! Occasionally, the trees need to be thinned to encourage faster, straighter growth, but even these culls can be sold to help cover operation costs. Want to double down? Certain trees, like walnut or chestnut, can start producing nuts after 3–10 years, and these nuts can be sold to generate additional income. Other producers double crop their timberland (planting trees far enough apart to grow other crops in between) or allow livestock to graze on the land for yet another income source. The best part? Trees keep growing, rain or shine, and so does their value. In total, timber typically increases in value by 2–14% per year, with taxes deferred until harvest. From 1905–2005, timber outpaced inflation by 3% per year, and the NCREIF Timberland Index outperformed even the S&P 500, with an average annual return of 12.88% per year.

10. Franchises

Remember the last time you visited McDonald’s, and that wonderful conversation you had with the store’s owner?

Of course you don’t, because those store owners are never there. They outsource all the day to day operations to any individual else, which turns their franchise purchase into a pretty passive earnings source. A franchise purchase presents you the proper to use a parent company’s trademarks, exchange secrets, and proven business plan in exchange for a percentage of the location’s profits. The requirements to starting a franchise varies by brand. McDonald’s claims one of the most expensive franchise fees, at $45,000, and the initial investment to build or purchase a store ranges between $1 to $2.2 million dollars. Plus, they require you to have a whopping $500K of liquid assets. Your return for investing that sort of cash? Well, you’d need to request an investor package to know for sure, but the average McDonald’s location spits off $2.6 million of sales per year. Different franchises require different time commitments from the owners though. Chick-Fil-A, for example, has one of the most competitive franchise programs in the country. They accept less than 0.4% of franchise applicants, and they require owners to be in store at least 30 hours a week. In that case, you’ve basically just bought yourself a part time job. Other franchises, popular franchise Subway, accept a much higher percentage of applicants and allow absentee ownership, which is a much more investor friendly arrangement.

The average Subway’s start up costs are only $116,000-$253,000.

saurabhbedage.medium.com - Top 10 Money Assets that can make you rich | by Saurabh Bedage

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