Being selective with your investments has always been important but in 2022, after the coronavirus crisis, you need to choose even more carefully.
The previous year created a tipping point in analysts' outlook coupled with market problems such as the China-US trade wars or Brexit uncertainties. In 2020, markets froze at a time when the consequences of the pandemic were devastating for the populations and economies of many countries. Analysts are optimistic today, seeing some signs of recovery brought about by the vaccine.
Anyone who invests this year should know what trends are typical for the investment market in 2022, where to invest, how to minimize risks, and what types of investments are the most promising. Our article will answer these and many other questions.
- Preparation for investment
- How to invest money to get a passive income
- Purchase of currency or precious metals
- Bank deposits
- Investment in real estate
- What to invest a large amount of money in
- Expert tips: where to invest money in 2022
- Is it profitable to invest abroad?
- Investment in real estate in Spain
- We will help you buy property in Spain
Here are some tips before investing:
- It is necessary to formulate an investment goal.
- Close all debts and create an airbag.
- Sensibly assess your financial situation and risks.
- Choose the right strategy and build a portfolio.
- It is necessary to learn quickly and be one step ahead.
The investment method should be based on minimum risk criteria. Before making a final decision, you need to study the future project in detail and identify all its shortcomings.
There are many ways to generate passive income: mutual funds, buying currency or precious metals, bank deposits, and real estate investments.
A mutual investment fund (MIF) is an investment instrument that collects cash contributions from various individuals or legal entities to invest in various investment securities. By pooling the capital of different people, you can gain access to various investments for profit on favorable terms.
When investing in a mutual fund, money is processed by a company specializing in managing various investment portfolios. They can consist of different securities such as stocks, corporate and government bonds, real estate assets, international securities, other mutual funds, mortgage bills, etc. The composition of the portfolio is determined in the mutual fund agreement.
Operation principles of mutual investment funds
Mutual investment funds are based on a set of investments consisting of stocks, debt instruments, fixed income instruments (bonds, promissory notes, time deposits, etc.) or a combination of both (stocks + fixed income).
In addition, they do not have expiration dates and do not require renewal. Therefore, they are a convenient alternative and make it easy to dispose of funds (liquid).
How to choose a mutual investment fund
MIFs and their management companies are governed by legislative rules that govern these investment instruments. Thus, the department is empowered to exercise control over all portfolios and company documents without any restrictions.
Each fund defines its own investment policy which is incorporated into internal regulations and approved by the Securities and Insurance Agency. Based on this information, the investor is able to make investment decisions in the fund according to their needs.
Profitability of mutual investment funds
Investing in mutual investment funds does not guarantee future profitability and your profitability is mainly generated by 2 factors:
- Capital gains or losses: when the assets that make up the mutual investment fund change in value (generating a profit or loss).
- Dividend and interest income: the profit received in a mutual investment fund through interest or dividends.
Benefits of a mutual investment fund
Below, we list the advantages of a mutual investment fund:
- Possibility of investing very low amounts.
- Liquidity (with a daily calculation of the contribution, the investor can save their capital at any time, distinguishing it from a fixed-term deposit).
- Globalization - access to any market.
- Several investment alternatives adapted to the risk profile of each individual.
- Professional management.
- The investor does not need to participate in buying and selling assets.
- Access to diversified investments.
- Partial or full redemption can be made at any time.
- Does not expire or need renewal.
- If your needs or investment goals change, you can transfer some or all of your investments to other funds that best meet the new requirements.
- Tax on real profits only.
One of the best ways to diversify your savings is to invest in precious metals.
Most investors keep their savings in the stock market or bank accounts in a world of paper money and digital loans. However, it is important to not only have a good trading strategy but also good strategies for trading precious metals which are an integral component of a balanced portfolio.
Precious Metals Market
The precious metals market has 3 main players:
Gold is one of the safest deposits. When the overall market return on assets and interest rates are low, there is a move towards gold.
Silver investments can be very profitable if done wisely although silver is less expensive by weight than gold and can be cheaper to trade.
Platinum is an essential component found in catalytic converters and is widely used in the automotive industry.
Many investors choose to invest in platinum over gold.
Precious metals are a good investment
Investing in precious metals is a great option as they rise in value over time and protect investors from inflation. In fact, they are a safe haven for any investor and can balance the returns on other types of investments.
A bank deposit is when funds are deposited in a bank, held for a certain time and in return, the depositor is paid interest.
The term and interest are stipulated in the agreement, and depending on the type of bank deposit, the interest can be fixed or variable.
Unlike paid accounts, deposits do not allow you to make daily transactions, recurring installments or partial withdrawals.
10 things you need to know before opening a deposit
Before opening bank deposits and signing an agreement, you should pay attention to the following key points:
- Term of the deposit: deposit terms usually range from 3 months to 10 years.
- Investment amount: some banks limit the investment amount, requiring a minimum or maximum. Remember that the maximum that you can invest is 100.000 € per bank.
- Elimination of profitability.
- Investment guarantee: always check that the money of the bank deposit is under the guarantee of the fund.
- The creditworthiness of the bank.
- Consequences of early withdrawal.
- Commissions: time deposits do not charge commissions.
- Automatic renewal: it is necessary to check if the bank has performed automatic renewal after interest has been calculated.
Are deposits abroad safe?
Bank deposits in a foreign bank are as safe as your home country. Opening bank deposits in foreign accounts are increasingly important. The processing is carried out entirely via the Internet and a term deposit is issued in a little less than a week.
Real estate investment is a favorite of many investors.
Many have earned by investing in real estate; some buy and then sell at a higher price while others rent out the housing on a permanent basis.
Real estate investment strategies
In general, there are 6 strategies to ensure profits when investing in real estate.
- Real estate crowdfunding is the easiest option for those who don't want to complicate things. It is a form of collective investment that is gaining traction in the real estate sector, thanks in part to platforms that connect investors with realtors. Thanks to this type of investment, as an individual, you can own property, rent it out or put it up for sale without having to invest hundreds of thousands of euros. It differs in its high profitability and absence of risks.
Buying property to rent.
This type of real estate investment is a good strategy for generating long-term profits.
It is important to consider the following points:
- Ratio of maintenance costs and profits.
- Price per square meter differs regionally.
- Status of an independent tenant or delegation of real estate management to the company.
Buying property for renovation and resale
The difficulty lies in finding property that can be quickly renovated, that is, one that needs minimal repairs and can be sold at a premium.
Investing in real estate for tourism purposes
The new trend of traveling and renting properties for a short period of time has made investing in tourism housing an easy resource for high short-term profitability.
When investing in vacation rentals, you should consider the following:
- Competent management of tenant rotation.
- Rental housing prices in a given area.
- Legal regulations for short-term rentals or investment properties.
Investing in real estate for commercial purposes.
You can buy industrial warehouses to earn money from renting offices.
Passive real estate investment has the lowest risk and can have very high returns. With this strategy, a group of investors teams up to acquire large real estate investments such as office buildings or shopping malls so that everyone receives a share of the profits effortlessly.
Basically, this strategy is about investing in a general real estate fund.
Investing in the stock market can be more profitable than investing in housing to generate income.
The advantages of investing in the stock market versus investing in real estate:
You don't need to go into debt.
Buying a home most often includes a mortgage.
You can invest in the exchange with a minimum amount of € 100.
- If you invest in real estate, you can buy 1 or 2 apartments. When investing in the stock market, you can own the shares of thousands of companies or mutual investment funds.
Buying shares is much faster than registering an apartment.
Dividends versus rental income.
From an apartment for rent, you can get a decent percentage (about 4-5%). In addition, with an increase in the cost of an apartment, the rental price also increases, making a profit. However, problems can arise if tenants turn out to be unscrupulous, the apartment is empty for some time, or if a pipe bursts.
Also, not all stocks pay dividends but you can choose those that have been profitable for continuous decades and receive a stable income.
The average time it takes for a house to sell is 1 year and the average time it takes for stock to sell is seconds. If money is urgently needed, shares are easier to sell than apartments.
Costs, taxes and commissions.
To maintain a house in good condition, it is necessary to periodically make repairs and pay taxes, utilities, and insurance. As a result, the amount can be significant.
Promotions do not require any special costs.
The profitability of the stock market is higher than real estate. On average it has been about 7-8% per annum over the past 200 years.
To invest large amounts, investors mainly choose the classic option of financial instruments in the stock market. Exchange trading has always attracted investors over the long period of its existence. The rest of the masses prefer more conservative types of investments such as keeping funds in cash, buying real estate, expanding business, and purchasing antiques or precious metals.
Investing funds is a serious step that requires a responsible attitude and a rational approach. For capital to work, you need to learn how to invest and use it wisely. If you correctly manage financial flows, it will bring you a stable income.
For each type of investment, experts advise the following:
This option cannot be called the best since the value of purchases decreases after a while and, accordingly, a person loses part of their savings.
In 2022, deposit rates will decline even more. It is necessary to open 2 deposits - in rubles and foreign currency.
- Buy housing in promising cities.
- Buy liquid 1-room or 2-room apartments.
- Postpone the purchase of commercial real estate until better times.
- Preserve savings and buy real estate abroad.
The cost of rarities will increase only after the end of the crisis period when they can be sold for good money.
Mutual investment funds.
Before investing in a mutual fund, you need to understand all the nuances. It is not worth investing if the principle of the fund's operation is not clear to you.
Start a business.
Not everyone is capable of starting a business since this requires entrepreneurial talent, special knowledge and experience. However, if it is difficult to start your own business, you can invest in someone else's. At the same time, it is important at the initial stages to invest part of your savings, gradually increasing the share as the trade develops successfully.
- Precious metals are one of the safest ways to invest. Precious metals are highly capital-intensive and highly liquid.
- Venture funds are a new way of investing on the domestic platform but experts' forecasts boil down to the prosperity and profitability of this type of investment in 2022.
- Binary options are characterized by making a profit by predicting changes in the prices of stocks, currencies, or indices for a certain period of time. However, this is not as easy as it seems. The investor must, using complex mathematical calculations, take a share of the risk and find a successful investment formula.
- Shares are an excellent option for those who do not like risks and want to make money in the future. It is important to choose the right securities that will bring the greatest income to the depositor.
- Your own Internet project is a way to generate passive income, subject to its promotion. However, you can purchase a ready-made product and immediately make a profit.
- Groups in social networks with a large number of subscribers attract the interest of advertisers. By placing ads in your promoted group, you can get passive income.
- Renting out real estate regularly brings income in all economic situations.
You can invest abroad in the following ways:
- Purchasing debt securities of foreign countries and corporations.
Buying ETF shares is a simple and less expensive way of investing abroad.
An ETF is a stock. The par is the net asset value of the entire fund divided by the number of shares. The market price depends on supply and demand.
- Overseas property funds REITs.
How REITs work:
- REITs work like classic asset management companies. They are engaged in buying or renting real estate for a long time.
- Tenants pay rent to funds that pay taxes (in their country), resolve all issues with renovation, search for new tenants, etc.
- Investors who own shares of the funds receive about 90% of the profits.
How to invest in Spain as a foreigner
Spain is a wonderful country where foreign investment can bring many benefits.
Investing in real estate in Spain can be very profitable. This is one of the countries with developed tourism and capital flows.
The costs associated with the purchase of houses in Spain may vary.
Taxes such as VAT, the documented legal act, and declaration of property income must be paid. But if the investor is foreign, they will incur 2 additional tax liabilities. In the case of a sale, this will be a non-resident income tax (IRNR) ranging from 19% to 24% of property value. If purchased, it will be city value-added tax.
Obtain the status of a tax resident in Spain to prevent overpaying
When investing in Spain, the right decision is to obtain tax resident status in order to reduce taxes.
A request for a tax residency certificate can be made in person, at the Treasury or online.
An individual is considered a tax resident in Spain if:
- They physically reside in Spanish territory for more than 183 days.
- They contribute to the main center of economic activity in Spain even if they do not reside in Spanish territory.
The best way to invest in Spain being as a foreigner: golden visa
The Golden Visa has been created for citizens outside the European Community who invest in apartments in new buildings in Spain or real estate equal to or greater than 500 000 euros.
That is, this formula allows you to access the benefits of a residence permit in exchange for economic investment.
What documents are needed to obtain a golden visa
If you are interested in investing in Spain and obtaining a golden visa, there are a few basic requirements you must follow:
- The investor cannot belong to the European Union.
- The investor must be of legal age.
- The investor must have no criminal record for the last 5 years whether in Spain or any other country.
- The investor has never been denied entry to any of the Schengen countries or any other country with a valid agreement with Spain.
- The investor has never entered or stayed illegally in Spanish territory.
- The investor must have access to private or public health insurance to cover their stay.
- The investor must have sufficient financial resources (to support themselves and their family) in Spain.
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