 |
Web Hosting by Netfirms | Free Domain Names by Netfirms |
|
|
|
|
|
|
|
Now that we have an income and freed up some money, let’s look at what to do with it. The other ways to build your nest egg are to invest your resources, namely time and money, into vehicles that will create money. This is called passive income. This is done through the techniques listed earlier: 401K, stocks, Real Estate and running your own company. Let’s look at each of these individually. 401K Pros: The 401K is a great tool as you get immediate return in the form of employer matching and the tax break. Cons: The downside is, you don’t really get these benefits until you are 65. You also have limited control over how the money is invested and you are restricted as to how much you can invest annually. This is a great tool that will keep you Just Over Broke until you retire. The Stock Market Pros: The market has returned, on average, just under 11% from 1924 through the middle of 2002. This includes the Depression and the crash in 2000. At this rate of return you double your investment in less than 7 years. Cons: It takes time to learn if you want to do it yourself, or it costs you money to have someone else do it. There are some vehicles worth noting here about the stock market. There are tax-deferred life insurance policies tied to indexed annuities, with a 0% floor. This means you can invest in the market, defer taxes and have no risk at all. The 0% floor means that you will not lose any money at all. Your $100,000 is $100,000 even if the market loses 35% that year. This does limit your upside return, however. If the market increases 50% this year, you will be limited by your cap which could be 8-10%. This is great when you want to eliminate risk. (It would have been great to have in 2000). Real Estate Pros: Can have tremendous ROI. It can also self fund itself with the rental income. Cons: The hassles of being a landlord are not for everybody, or you have to spend your profits on a property manager. There are risks and it takes time to learn. There are ways and tools that you can use to invest in real estate in which you do not have to be a landlord or property manager. Some techniques are short selling, flipping, rehabbing, lease-optioning and subject-to investing. These methods allow you to control property with little or no money.
|
|
Send mail to
multibiz11@yahoo.com with
questions or comments about this web site.
|
