Do you ever think about life after retirement?
Depending on where you are at in your career, the amount of time you spend thinking about your financial future may vary, but it is an important question to consider regardless.
This article discusses five ways you can increase your investing potential, why you should start investing, and the perks of investing in real estate syndications so that you have the financial freedom later to enjoy retirement.
Why You Should Start Investing Now
Investing is essential at every stage of your career journey. While the kinds of investments you make will vary depending on how close you are to retiring, there is always time to start making wise investments to secure your future wealth.
But what if the market takes a dive?
Don’t let the fear of a bad market keep you from investing. While tucking money away in a savings account or relying on your TSP funds to carry you through your Golden Years sounds like the responsible thing to do, you won’t maximize your earning potential, and your hard-earned money will have less value by the time you need it. Investing now will allow your money to mature at a healthier rate, and the level of risk you decide to take is entirely up to you.
If you’re new to investing though and aren’t quite sure how to increase your investing potential, fear not. With resources and connections, investing can be a great experience. Read on for five ways to increase your investing potential and feel confident about it.
5 Ways Beginners Can Increase Their Investing Potential
- Learn About the Market – When you hear the term “the market” in the financial world, it refers to the act of buying and selling assets like stocks, bonds, and other investments.
As a beginning investor, educating yourself on some basic parts of investing in the market will help you build a strong foundation. A few things you need to be aware about the market before investing include:
- You will need an investment account.
Don’t use your bank account. An investment account is similar to other accounts and acts as a holding tank. You feed it with cash that you then use to invest in stocks or bonds.
- There Will Be Ups and Downs.
When you invest in a stock, you purchase it at a certain price, and hold it or sell it at a later time. The stock market goes up and down, but the general idea is that a good stock will trend positive over time. It all depends on which part of the wave you buy and sell.
Let’s say you buy a single stock for $100. If the market goes up and you decide to sell the stock at $120, you have earned $20 on the investment. Conversely, if the market dips and you sell the stock for $80, you are out $20.
Many find watching their investment go up and down too stressful and opt for a more conservative option. If you are near retirement, stocks may not be the best option. And that is fine. There are many options for investing that will build your personal wealth better than relying on savings and traditional pathways to retirement.
- The Difference between Stocks & Bonds.
When a company decides to go public, they offer small pieces of ownership, or stocks, in the company that can be bought and sold on the market. Stocks are typically considered a riskier investment option because the market can be volatile, shifting quickly based on uncontrollable events. On the other hand, they can be far more lucrative when things are going well.
Bonds act more as a loan for companies looking to raise capital and are preferred by more conservative investors. When an investor buys a bond, the company will pay them back with interest. Additionally, if a company should go bankrupt, bondholders will be refunded their money.
2. Determine Your Risk Tolerance
When taking any financial risk, you want it to be a calculated one.
The amount of cash you are willing to put on the line depends on several factors, such as your age, marital status, number of dependents, and level of debt. So you will need to assess these factors before you invest and determine if you are willing to invest in a riskier option like stocks or prefer a more conservative option like bonds or real estate syndications.
Typically, younger investors hold riskier portfolios because they don’t need to pull their money and can ride the wave longer. In contrast, mature investors prefer conservative portfolios that are less likely to experience significant dips when they need the money most.
3. Diversify Your Portfolio
It is vital to have a variety of investments so you aren’t stuck in a tricky spot if one doesn’t pan out.
While stocks and bonds are well known, other investment opportunities include real estate investing, multifamily real estate syndications, gold, and municipal bonds. It is wise to balance some of your riskier investments with more conservative ones and decrease your riskier investments as you near retirement.
4. Build a Nest Egg
While investments are great for building wealth long term, they don’t give you access to liquid cash. Sometimes, life circumstances require money fast, and you may not have time to wait.
Emergency savings will help you out of a tough spot without having to rely on selling assets. As a general rule of thumb, your nest egg should be enough to cover 3 to 6 months of expenses.
5. Have an Evolving Portfolio
Your financial needs at 35 are not the same as your financial needs at 65.
Your investment portfolio will need to evolve with you throughout your stages in life. As mentioned in step two, your risk tolerance will vary depending on many factors in your life at a given time. Your portfolio should not be static, because life isn’t static.
Even if you have a low risk tolerance, investing is the wisest decision to get the most out of the money you earn today.
Are Real Estate Syndications Smart Investments for Beginners?
Real estate may sound intimidating to new investors, particularly as a foreign service officer investing abroad. But there are ways to get in the game that are less risky and involve less work.
Real estate syndications are a great option for foreign service officers because you can participate as a passive investor. A passive investor is someone who provides cash for a project and enjoys an ROI without having to do the hard work involved.
In a multifamily real estate syndication, passive investors pool their money to purchase a multifamily apartment building, and a syndicator runs the project on their behalf. The syndicator coordinates with real estate agents, contractors, and other stakeholders to ensure the project runs smoothly.
Syndications are also a sound choice for conservative investors wary of recession, as multifamily properties fare quite well during times of economic uncertainty.
While there is never a guarantee on the kind of return you will see, investing in a syndication allows you to leverage the expertise of real estate professionals to make sound decisions and earn healthy returns.
Key Takeaways
- You need to make informed investments to make the most out of your financial future.
- The stock market and traditional real estate investments aren’t the only way to increase your wealth.
- Your portfolio should evolve with you through the stages of your life.
- Real estate syndications are an excellent investing option for foreign service officers to build wealth while being abroad.
Want to learn more about investing in a multifamily real estate syndication?
Passport REI was founded by foreign service members and real estate pros to help other foreign service officers and their families to build wealth and security.
Contact our team and learn more about achieving the financial freedom you deserve after years of service.
