I got into investing some years back. It definitely is one of the decisions that I have never regretted in my life. Before starting though, I was asking myself – can investing make you rich?
What I have learned since – the answer to the above will depend on couple of things. Firstly, what is your definition of rich. Secondly, how much you are willing to invest. Lastly, how much time you give your investments to mature.
Below I will look into things/assets people have invested into on their journey to becoming rich. There isn’t a formula that makes a person rich – you have to do what feels more natural to you and enjoy the journey.
what investment types exist?
Firstly, when I say invest in this context – I do not only mean stock market and likes. There are many other ways people invest and make positive return. In the last decade – collectibles have been an incredible asset class.
Rare whiskeys and classic cars have both delivered way over 100% growth. In case of whiskey – the right investment could have delivered you nearly 500% growth over 10 year period. You can read the article I am referring to over here.
If you were to put the money a cheap investment property costs into the right type of whiskey 10 years ago – you probably would be a millionaire today. The issue with this – you have to be a specialist in the right type of collectibles. I can reassure you without doing much research – majority of whiskeys didn’t deliver any growth.
On top of the above, there are many other types of investment to consider. Property, stock market, government securities, crypto currency, art, the list goes on and on. The key with this – finding the right balance of how much money you allocate to any given class of assets.
can investing make you rich?
Let’s look at the numbers next. It is hard for me to say for certain if investing can make you rich. You will be the only person to know the definition of word RICH in your view. My personal experience here is following – consistency and solid strategy can really help you achieve a lot.
Below is a table with a couple of scenarios – you can see different monthly investments across with expected returns over time. The top part of the table is slightly more conservative at 6% yield while the bottom part is slightly more bullish at 10% yield.
You can see in the above table that even an investment as little as £300 per month can add up to nearly £300k over 30 year period if you were averaging 6% return. The overall value of your investment more than doubles over the same period of time if you manage to get an average yield of 10%.
Once you look at the table above you will be able to say if any of the above outcomes actually makes you RICH. Even if this doesn’t turn you rich, having money to be able to take on the right opportunity when one presents itself to you is a great place to be at.
what asset classes can be considered?
When it comes to choosing where to put your money it has to feel right for you personally. If you have been researching art and understand much about it – potentially starting your collection is the right way forward.
Next thing to keep in mind – budget available. Property is a favourite for many. The issue many potential investors face – the deposit. Buy-to-let can require a deposit of 25% which isn’t available in many peoples bank accounts at any given point in time. The positive here, at least you know how much you need in order to start doing what you like.
In order to speed things up in terms of getting to your goal consider alternatives. For example – buying into stock market or finding dividend paying stocks. Either of the options should help your portfolio grow.
Leaving cash in your current account while trying to save for a deposit wouldn’t be wise. Current inflation rates will eat into your hard earned money real quick. On a flip side, a 5-10% return on your investment will help you to get to your goal quicker.
If you think that the cash available to you to start isn’t enough to consider investing – I bet you are wrong! You can start with as little or as much as you have. Any start is better than no start. Look into this article and see how even the smallest of investments can add up over time.
Consider also adding some more risky and volatile investments to your portfolio. Things I am referring to here are the likes of crypto currency. I wouldn’t put all my savings into it currently however 5% or less of my portfolio could be allocated to it.
alternatives to your preferred investment type
Let’s go back to you wanting to start investing into property. While this could be a dream for many – saving for a deposit isn’t an easy task. There are alternatives however you could consider.
There are companies that are called REITs (Real Estate Investment Trust). These are traded on the stock market and you can buy shares in these. One criteria for a REIT is to distribute 90% of its profits to the investors.
You can benefit from becoming a property investor without the need to actually manage anything yourself. You can benefit from both the dividend payments and value appreciation at the same time.
What this does allow you to do – you can grow your portfolio and decide at later date if you still want to become a landlord. `The investment can be sold at any point and returns used to start building your own property empire.
There are many REITs available to invest into. An article that caught my eye on this recently is here. You can currently make upwards of 9% dividends per year plus I would argue there is some value appreciation upside here as well.
Similar, if it is art you would like to consider but Picasso is out of reach – look for indexes that track art market or companies that hold art. This can become a nice and cheaper alternative for you to dip your toes into the market. The returns from this can then be used to buy an actual piece you would like to hold.
summary
I am a believer that investing is the right thing for every one of us to do. If this isn’t something that will make you rich – it will give you way more options down the line.
Investments vary from whiskey to art, to classic cars, to stock market, to government bonds etc. You need to pick an area that interest you the most, start researching and buying into it.
And remember – if the investment type you are interested in seems too pricey for you to start in, look for alternatives. There are many ways your can participate in the market without having to spend silly amount to start with.
This process can both become exciting and beneficial to you in the long term. You will be the one to say if the returns that you get out of this make you rich over time or not.
Whatever you decide – if it is stocks and shares, make sure you invest through ISA. The tax you won’t have to pay over long term will add a lot to the final value of your portfolio.