6 Ways To Make A Capital Gain
There are basically two types of investment income. Capital gains and investment income.
Investment income is income that you receive from property, examples of investment income are interest on savings, rents on real estate and dividends on shares.
Capital gains are the increased value of assets; Examples of capital gains are increases in the value of assets, shares and other assets.
Some investments generate capital gains but not income; examples of these are precious metals such as gold, bitcoin, antiques and other collectibles.
Here are the investments that generate a capital gain:
Stock market
The stock market offers excellent opportunities for capital gains. For most people, investing directly in the market is not an option because of the transaction fees accrued on the purchase and sale of shares, it is not worth the effort, but there are many funds under management in which investors with limited funds can participate. New Zealand is one. Investors can drop feed money into the market through Sharesie, and there is the opportunity to invest in a variety of funds or individual companies. Other platforms of the same type in New Zealand include Investnow, Kernelwealth and Hatch. However, these are not the only ones.
Your pension scheme invests in managed (mutual funds) and they are also a kind of capital gain. In New Zealand, joining Kiwisaver is pointless. Kiwisaver is a pension scheme in New Zealand.
Property
The real estate market has been a popular Captain Gains tool for many investors who use not only their money but also other people’s money in the form of a loan. The income comes from the rent on which the mortgage is paid. All of the associated costs are the most popular form of capital gain and the easiest for a novice investor to get their toes wet in the market while learning, as there are multiple mutual funds available and start-up costs are minimal. In New Zealand, Sharesies costs only $ 1 in admission, allowing you to invest in managed funds or individual companies. That’s a great way to get a tax deduction. This type of investment can turn into custard, like for tenants. If you are willing to take the risk, this investment may be appropriate.
Your own home is a good source of capital income if you plan to sell at some point.
Another way to get to the real estate ladder is to buy shares of real estate investment companies in the stock market. This can be done by investing in individual companies or in managed funds that invest in real estate.
Compound interest
You’ve probably heard of interest rates; that is, when you invest in fixed-term accounts at x% interest. Instead of getting your interest payments to your bank account, you let them add to your principal and earn interest on your principal and past interest payments. This is called the additional interest rate.
The capital increase is called a “capital gain”.
Interest rates are currently very low (2020); in some cases lower than inflation, making such an investment less attractive. Therefore, it is important that you exercise due diligence and do not have to be attracted to a higher interest rate finance company because higher interest rates carry a higher risk. These higher interest rate finance companies lend higher risk to borrowers.
I’m not saying you shouldn’t invest your money in these companies, but rather do due diligence and at least diversify your portfolio instead of investing all your life savings in one company.
Gold
This is purely speculative, but it can be a good hedge against a market downturn. One downside to gold is finding its storage location. Another way to invest in gold is to buy gold stocks in the stock market. Buying gold coins from auction sites like eBay and Trademe is another option. As with other investments, it’s worth doing your homework and reading all about gold and other precious metals.
Cryptocurrency
Cryptocurrencies like Bitcoin and the like should be treated as speculative investments, so only invest money here if you can afford to lose it. I say use your discretionary income to buy cryptocurrency. This type of investing can be a roller coaster ride, but one piece of advice that can be helpful is that you don’t just buy all of your cryptocurrency in one transaction, but do it weekly, twice weekly, or monthly so you have the opportunity to make a purchase when the currency is low. It is called the average.
Collectibles / Antiques
Investing in collectibles can give you a sense of satisfaction and profit when you plan to sell. You really need to know your stuff when dealing with antiques. Always remember that something is only worth what others are willing to pay for. If someone is willing to pay $ 1,000 for a painting at auction, it’s worth it, but if another painting is sold at auction for only $ 10, it’s worth it. The value of something is just a matter of opinion.
Recently (2020), some of Banksy’s paintings sold for over $ 100,000 in New Zealand. The seller of the paintings paid a total of $ 500 for them in London (UK) some years earlier. It just shows how one eye trading can be profitable.
Collectors of small items such as stamps, banknotes, beer stickers, and so on can list their duplicates on auction sites to fund their hobby.