6 ways of capital growth
There are basically two types of investment income. Capital gains and investment income.
Investment income is the income you receive from an asset, examples of investment income are interest on savings, rent from property and dividends from stocks.
A capital gain is an increase in the value of an asset; an example of a capital gain is an increase in the value of property, stocks, and other assets.
Some investments provide capital gains but do not generate income; examples are precious metals such as gold, bitcoins, antiques, and other collectibles.
Here are investments that provide capital gains:
The stock market offers excellent opportunities for capital growth. For most people, investing directly in the markets is not an option because the transaction fees paid to buy and sell shares make it not worth it, but there are many managed funds that investors with limited funds can participate in. New Zealand alone. Investors can dig into the markets with Sharesies and have the option of investing in different funds or individual companies. Other similar types of platforms in New Zealand are Investnow, Kernelwealth and Hatch. However, these are not the only ones.
Your pension scheme invests in managed funds (mutual funds) and these are also a form of capital growth. Joining Kiwisaver in New Zealand is easy. Kiwisaver is a New Zealand superannuation scheme.
The real estate market has been a popular Captain Gains tool for many investors who use not only their own money, but also other people’s money in the form of loans. The income comes from the rent that pays the mortgage. All the costs involved are the most popular form of capital growth and the easiest for new investors to get their feet wet in the markets and learn as they go, because there are several mutual funds available and the start-up costs are minimal. In New Zealand, Sharesies costs just $1 to join, giving you the option to invest in managed funds or individual companies. This is a great tax deduction. This type of investment can turn into the custard of wayward tenants, for example. If you are willing to take a risk, then this investment may be right for you.
Your own home is a good source of capital gains if you intend to sell at some point.
Another way to get on the property ladder is to buy shares of investment companies on the stock market. This can be done by investing in individual companies or managed funds that invest in property.
You’ve probably heard of compound interest; that is, if you invest in fixed term accounts at x% interest. Instead of receiving interest payments on your bank account, you allow them to be added to your principal, and you earn interest on the principal and previous interest payments. This is called compound interest.
An increase in your capital is called a “Capital Gain”.
Interest rates are currently very low (2020); in some cases lower than the rate of inflation, making this type of investment less attractive. It is therefore important to exercise due diligence and not be tempted by any finance company that offers higher interest rates than usual, because with higher interest rates comes increased risk. These finance companies that offer higher interest rates lend to higher risk borrowers.
I’m not saying you shouldn’t invest your money in these companies, but rather do your due diligence and at least diversify your portfolio rather than putting all your savings into one company.
This is purely speculative information, but can be a good hedge against falling markets. The only downside to gold is finding a place to store it. Another way to invest in gold is by buying gold stocks in the stock market. Buying gold coins from auction sites like eBay and Trademe is another option. As with other investments, it pays to do your homework and read everything you can about gold and other precious metals.
Cryptocurrency such as Bitcoin and similar should be considered as speculative investments, so only invest in it if you can afford to lose it. My point is use your discretionary income to buy cryptocurrency. This type of investing can be a rollercoaster, but one tip that can be helpful is to not just buy all of your cryptocurrency in one transaction, but do it weekly, bi-weekly, or monthly so that there is a chance that you have made a purchase. when the currency is low. This is called averaging.
Investing in collectibles can give you a sense of satisfaction and profit when you decide to sell. You really have to know your stuff when dealing with antiques. Always remember, something is only worth what others are willing to pay for it. If someone is willing to pay $1,000 for a painting at auction, that’s what it’s worth, but if another painting sells for just $10 at auction, it’s worth it. The value of something is only a matter of opinion.
Recently (2020), some Banksy paintings have sold for over $100,000 in New Zealand. A few years ago, a seller of paintings in London (Great Britain) paid a total of $500 for them. It just goes to show how profitable looking at a deal can be.
For smaller items like postage stamps, bank notes, beer labels and so on, collectors can list their duplicates on auction websites to help fund their hobby.