Do you want to increase your money quickly, but have no idea how? We explain the best strategies for building wealth.
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Ways to Building Wealth: What options are there?
There are different ways to grow money. Investments in stocks, ETFs, real estate or raw materials are conceivable for this.
The different forms of investment differ for investors in terms of the expected increase in profits and the risk inherent in them. The rule of thumb is: the higher the return, the higher the risk.
In order to achieve an attractive increase in profits while still keeping the risk moderate, you should rely on a balanced portfolio of different forms of investment.
You can grow your money with these types of investments
1. Spare in ETFs
ETFs (Exchange Traded Funds) are exchange-traded index funds.
An index fund is an investment fund that attempts to replicate a specific stock market index such as the DAX or the Dow Jones. To do this, it collects the money of many investors and invests it in the securities underlying the index.
The return on an investment in ETFs depends on the development of the market and not on the development of individual stocks. ETFs are therefore a comparatively safe investment.
If you decide to build wealth with ETFs, you should ideally invest your money in an ETF that tracks an index that contains a variety of stocks and bonds from different countries and industries.
The following ETFs are suitable for this:
- Core MSCI World USD (thesaurierend)
- Core S&P 500 USD (thesaurierend)
- STOXX Europe 600 EUR (distributing)
Distributing ETFs usually pay you a profit share every quarter. Accumulating ETFs, on the other hand, do not pay out dividends. Instead, they reinvest the profit share. This means you benefit from the compound interest effect.
Accumulating ETFs are therefore preferable as a form of investment to distributing ETFs.
To save in ETFs you need a portfolio. Online brokers such as Trade Republic make opening a portfolio child’s play today. They offer portfolio management, usually free of charge, and can be operated intuitively.
Trade Republic also pays interest on uninvested capital at 2% pa and distributes the interest accrued monthly. Investing your money with Trade Republic is doubly worthwhile.
2. Invest in high-dividend stocks
Dividends are regular distributions of profits.
These profit distributions are usually made once a year by German companies, while US companies often distribute them quarterly.
The amount of the distribution varies from company to company and from year to year. While some companies only pay out a few cents per share, others pay out up to €10 or more.
For example, Volkswagen distributed €7.56 per share to its investors in May 2022 and also decided in December 2022 on an additional special distribution of €19.06 per share in January 2023. Anyone who owns 10 Volkswagen shares in 2022 was able to look forward to dividend payments totaling €266.20.
Such an increase in profits would not have been possible with a comparable investment of capital on any fixed-term deposit. Investing in high-dividend stocks can really be worthwhile.
3. Invest in mutual funds
An investment fund is a collection of securities headed by a fund manager. This fund manager decides which securities are collected in a fund and in what weighting. Actively managed funds generally cannot be purchased on the stock exchange.
If you invest in an investment fund, you have the advantage that potential losses can be compensated for. If the company value of one of the companies represented in the fund falls, the value of the other securities included can compensate for this loss. To ensure this compensation, fund managers usually invest in stocks from different sectors and thus reduce your investment risk.
The disadvantage of investing in an investment fund is that fund managers cost a lot of money and the investment therefore involves certain fees. So before you decide to invest in a fund, find out exactly how high the fund management’s regular fees are.
4. Invest Cryptocurrencies
Cryptocurrencies are digital means of payment that are created using encryption technologies.
Cryptocurrencies are highly speculative. Nobody knows exactly how their value will develop in the coming years. Anyone who invested in Bitcoin a few years ago became millionaires, but recently experienced a serious decline in prices.
Cryptocurrencies are therefore an investment for investors who are willing to take risks.
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If you decide to invest in cryptocurrencies, they can complement safer forms of investment. However, to avoid excessive losses, they should play a relatively minor role in your portfolio.
5. Invest in gold
To increase your money, you can also invest in gold. Because interest in the precious metal has not waned.
Unfortunately, gold is not a reliable investment in terms of its performance, as its value fluctuates more on average than share prices. When you invest in gold, you therefore take on a higher risk.
In addition, there is currently no financial regulator that monitors trading in gold. There are also no legal requirements for gold sellers. For this reason, investors are often deceived when buying gold with deceptively real counterfeits. If you want to invest your money in gold, it’s worth doing extensive research to avoid any unpleasant surprises.
6. Invest in real estate
Investing in real estate can also help you grow your money quickly .
However, caution should be exercised when investing in real estate, as investing in real estate can also turn out to be a real negative deal. This can happen very quickly, especially if no suitable tenants can be found for the purchased property or if the investment property turns out to be a permanent construction site.
The following real estate strategies are recommended as investments:
- Investing in multi-family homes generates high rental income
- Investing in garages and parking spaces generates income without any effort
Invest in an apartment building
Investing in an apartment building with six or more units is particularly suitable because this is where a positive cash flow is most likely to be achieved. A positive cash flow means that after deducting all costs and taxes from the incoming rent, a surplus remains. You generate a (passive) income by purchasing your property.
When buying an apartment building, your focus should definitely be on the property valuation. Only by purchasing a high-quality house can the desired positive cash flow be guaranteed. However, if you purchase a house that regularly incurs high maintenance costs, you are at risk of a possible surplus and, in the worst case, you will pay more.
Invest in garages and parking spaces
Especially in cities, money can be invested sensibly by purchasing garages or parking spaces.
Because of the lack of parking spaces, residents here are willing to pay high prices for a garage or parking space. This fact alone gives you a high return.
Buying a garage or parking space involves little risk. Since the investment costs are lower and there are no or only minimal maintenance costs, landlords of garages or parking spaces have to worry much less about loss of rent or vacancies than landlords of residential properties. Buying garages or parking spaces is a solid, low-risk investment, especially in urban areas, that can quickly increase your money.
7. Invest in education
Investing in education can also increase money quickly. After all, education is still considered an investment that gives you the highest return in the long term.
So if you dream of an MBA abroad or further training to become a coach, the money invested in this will be well spent.
However, you should be careful when investing in education: knitting, dancing or fishing courses are certainly a pleasant way to pass the time, but they will probably only give you less income in the long term.
How can I grow my money quickly?
There are different ways to increase your money. Investing in ETFs or high-dividend stocks is probably the safest and easiest investment out of the options available.
If you have the time and interest in real estate, you can also think about investing in an apartment building or even garages and parking spaces. These forms of real estate investments involve little risk and generate a positive cash flow.
How can you increase €1,000?
There are different ways to increase €1,000. Probably the safest form of investment is investing in ETFs. But buying high-dividend stocks is also possible because it enables a shorter-term return.
Since education still promises the highest return, €1,000 can also be increased in the long term by investing in further training.
How to increase €10,000?
You can increase €10,000 by investing in ETFs or high-dividend stocks. Depending on where you live, you can also buy a parking space or a garage with €10,000. Investing in a garage or parking space ensures you a long-term passive income and means no maintenance costs for you.
How long does it take to double money?
How long it takes to double your money depends heavily on the type of investment you choose and cannot be answered in general. In principle, however, the following applies: If you divide 72 by the interest rate on your investment, you get the length of time required for a doubling.
With an interest rate of 4%, it takes 18 years to double your capital.
What is the 4% rule?
The 4% rule is also known as the 25 rule. This rule can be used to calculate the amount of assets required to be able to retire.
To do this, you must first determine how high your annual expenses are. Because these expenses must be covered by an annual withdrawal of 4 percent of your assets. That means:
You need assets worth 25 times as much money as you spend in a year.
So if you need 1,800 euros per month to live on, that’s 21,600 euros per year. In this case you should have at least 540,000 euros. In this case, you could withdraw 4% every year without any loss of capital.