- Do you agree that it would be great to have a magic formula for managing your own finances, applying which all worries and concerns could disappear! Unfortunately, this scenario is unrealistic. However, each one of us is able to create conditions for saving and increasing our own capital. Take 3 easy steps to become financially independent:
- Define your financial goals
- Make a spending plan and try to stick to it
- Start investing
- Let's have a closer look at the last point: can I become an investor if I don't understand finance, have no investment experience and have a small initial capital?
To begin with, let's dispel the popular fears that investments are only for rich and magically knowledgeable people. An investor is not necessarily a wealthy financier.
Investing is an investment of funds for the subsequent receipt of benefits in the form of an increase in the initial amount. All over the world, people of different income levels, who want to have an additional income without interrupting their main job, invest in securities.
Where do they invest in Kazakhstan?
Suppose you have a free balance of $10 thousand (maybe less, or maybe much more), and three years ago you decided to maximise this amount by investing. Where could you invest them?
Bank deposits.
Pros
This is a simple and straightforward way with guaranteed profitability. Part of the deposit, up to 15 million tenge, is insured by the state. It is convenient to deposit and withdraw funds.
Cons
When investing in national currency, the profitability does not exceed the inflation rate.
Bank deposits in foreign currency have a very low rate, not exceeding 1% per annum.
We have all witnessed the liquidation of banks more than once. Over the past few years, 6 banks have stopped their activities, which reduces confidence in the banking sector.
Benefit
Perhaps you are afraid of the devaluation of the tenge and consider only foreign currency deposits. If you had placed your $10,000 on a dollar deposit with a maximum rate of 3% in Jusan Bank in 2017, you would now receive $10,940.
Investments in real estate.
Pros
One of the most common and easiest ways to keep your finances. Real estate can be rented out or saved for the future for children and grandchildren. This is something that you can touch with your hands and see it live.
Cons
When renting out, the investment payback period can be up to 20 years. It is also necessary to take into account the costs of maintaining housing in a presentable view, i.e. expenses for the repair and replacement of furniture / equipment. In case of urgent need for funds, there is an impossibility of instant sale. If we turn to history, housing prices in our country are quite volatile. So, in recent years, there has been a decrease in prices. Since 2014 housing prices in Almaty on average decreased from $1950 to $1050 per sq.m.
Benefit
You could use your own money in 2017. buy only a 1-room small-sized apartment in an area remote from the center, in an old house. Having invested about $ 1.2 thousand in its renovation and arrangement, you could rent out an apartment for $ 100 per month, investing in renovation for $ 300 every year. You could sell it in 3 years for the same price of $ 10,000. Taking into account the income / expenses received and the possible partial placement of the received lease payments on a foreign currency deposit, the final amount would be about $11,700.
Own business.
Pros
Constant and relatively controllable income. The ability to increase profits through the introduction of new solutions.
Cons
Initial capital and basic business knowledge are required. It requires constant investment, which means that you will reinvest the profits earned, and the desired peace will not come quickly. High competition, and as a result, the business will take 100% of your time and attention. High risks, consumers are spoiled by the choices they have, demand for your product or service can decrease, which can cause huge damage to your business.
Benefit
If you were not ready to take the risk of starting your own business and losing a stable income, because business required direct daily management and the need to be fired from work, then this business would bring more trouble. If you made the decision to start your own business, you would earn 20% per year in a favorable scenario, but all the earnings would go to your operating expenses, because the spouse's salary would not be enough to serve the needs of the family. As a result, you could stay with your $10,000 in 3 years.
Investing in the stock market.
Pros
Profitability is not limited, the level of reliability can be regulated, plus there are tax incentives. You can start with any amount, continuing to live your usual life. Suitable for both beginners and professionals.
Cons
Profitability is not guaranteed. The probability of losing part of your investment while investing in high-risk instruments is present.
Benefit
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If you had made the decision three years ago to invest $10,000 on the stock exchange and chose a conservative strategy and bought Halyk Bank's bonds, then you would have earned $11,800.
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By simply buying Apple's shares for the full amount, your portfolio would be worth $40,400 today.
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At the same time, an investment in Microsoft's shares would have brought you to $27,272, i.e. an increase of 172% in 3 years!
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You could have made more money if you had invested in Tesla's shares. In this case, the capital gain in 3 years would be + 596%!
The numbers don't lie, and the truth is this: the sooner you start investing, the more opportunities you have to increase your capital. Those investors who started earlier are more likely to see significant returns on their investments. As legendary investor Warren Buffett once said: “Someone's sitting in the shade today because someone planted a tree a long time ago.” The index of the best American stocks, S&P, has grown by an average of 11% per year over the past 10 years.
Three Frequently Asked Questions::
Question 1. How much money is required to start with?
You can start with any amount, but we recommend starting with a few thousand US dollars for a more significant result. It is important to keep in mind the potential commissions from trades. For example, Jusan Invest does not have minimum fixed commissions, but all other Kazakhstani brokers have these thresholds.
Question 2. What is the best way to invest: buy securities through a broker or transfer money to asset management?
This choice is individual. The mutual funds are managed by professionals, and this takes the burden off you to choose your own securities. In addition, a mutual fund with a bond strategy is an excellent solution for an investor who wants to invest in fixed income instruments, but does not have enough money to buy bonds on his own. One of the main advantages of mutual funds is that you do not need to worry about risk diversification, because each fund has a wide range of instruments in its portfolio. When buying securities through a broker, you make your own decision on each investment. At the same time, for example, Jusan Invest, in this case, provides customers with daily analytics that help make decisions.
Question 3. In which company should you open an account? Who can you trust?
It is important to choose an experienced professional company, transparent and customer-oriented, with reasonable commissions. We recommend using the services of Kazakhstani brokers operating in the legal field of the Republic of Kazakhstan. Jusan Invest, being a broker with many years of experience in the market, offers clients the most profitable solutions: free online account opening and maintenance, the best commission rates on the market, a convenient mobile application for account management, portfolio tracking and online trading.
