The below references are opinions and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
You’ve worked hard and amass a fair sum of money? You’ve been a diligent employee or a hardworking business owner. Or maybe you just inherit a lump sum? No matter where the money came from, now you are looking for investing ideas to make that extra money grow.
If this is your situation, you are in luck! This post will break down 11 investing ideas that you can explore further if interested. Do not consider this as professional advice on investing, but more of a list of investment ideas to explore further on your own.
For each idea, I will try to go through these 4 criteria:
- Knowledge required: Does this need a high level of knowledge and skill to make a return, or is it a more passive type of investment?
- Potential returns: Is this investment has a high return on investment potential?
- Scalability: Can this investment vehicle maintain its return potential with higher investment amounts?
- Liquidity: Is the investment can be cashed out easily?
NOTE: Although this post is more about ideas than advice, I have 2 specific advice to give:
- Whatever investment ideas you want to pursue, I strongly suggest that you do your research. You need to understand where you are putting your money in. Pursuing investments without doing your research is closer to speculation and gambling than anything else.
- Invest money you can afford to lose. You should not invest money that is needed to pay your bills or your basic needs.
Now that all have been said, let’s get on the fun part: Lump sum Investments ideas
Paying all personal debt
This is hands down the best, instant return investment you can make. Stopping interest rates on its tracks is a very good investment.
Knowledge needed: no knowledge is needed to pay off debt. If the lump sum you have is lower than the amount of debt you have, focus on paying the highest interest rates amounts first.
Potential returns: The potential returns are high, depending on the loans you are paying back. For credit card debts, the return on investment is 20% on average, for payday loans it can be as high as 391% !!
Scalability: This is not scalable because you can only pay back what you owe. Once it’s paid off, there is no more to pay… logic isn’t it?
Liquidity: This is not applicable in personal debt.
- Read our comprehensive guide to pay off debt
This is another very potent money move. According to the most prolific stock investor of the modern era, investing in yourself is considered the best investment:
“The best investment you can make is an investment in yourself. The more you learn, the more you earn.” – Warren Buffett
Knowledge needed: You need to know yourself. There are 2 approaches to this.
- Investing in something that you are gifted at. You are very comfortable at speaking in front of people? Investing in pushing your public speaking skills further will give you an advantage people won’t be able to imitate (my favorite approach)
- Investing in a weaker, “bottleneck” skill you are struggling with. You are slowed down in your career because you are behind with your presentation skills? It could be worth investing in learning and practicing this skill by hiring a coach or doing courses online.
Potential returns: The returns are potentially limitless.
Scalability: This is not a scalable investment because of our limited capacity to learn. The time required to master a new skill is significant, hence the importance of taking the time to research what skill would yield the most return.
Liquidity: You can cash out on your investment by applying your knowledge, not just learning.
High Income Skill: A skill that, when mastered, can generate $10 000 or more in revenue. This can include:
- Digital Marketing
- High Ticked Sales
- Video production
Index fund investing
Index funds are a group of stocks that are widely diversified and aimed at representing the health of the broad economy. You might buy an index fund representing the S&P 500 or any other indexes. They can be bought through exchange traded funds or mutual funds.
Knowledge needed: These are mostly hands off investment. You don’t do the individual stock picking, but may have to rebalance your assets allocation from time to time. All you have to do is open an account at a brokerage service and transfer the money. The index funds that charges the lowest fees are the exchange-traded funds (ETFs) and I suggest that you explore them.
Potential returns: On average, the S&P 500, between 1957 and 2018, had a return of 7.96% per year.
Scalability: This is very scalable. There is no limit to the amount of money you can invest in index funds.
Liquidity: This type of investment is very liquid. You can cash your investments almost instantly.
- What is an ETF? A beginners guide by Crediful
Individual Stock Investing
Stock investing is doing educated guesses on how a company will perform. It is not to be confused with stock trading, which involved buying and shorting stocks based on news, timing and emotions. Both can be very lucrative, but stock trading to me is not considered as investing, but more of a very lucrative occupation.
Knowledge needed: Successful stock investing requires a high level of knowledge. You need to learn accounting and master the interpretation of financial statements. To add to that, you need to understand the industry you are investing in and its details.
Potential returns: Very high. Being a successful investor is probably the surest way to make enormous amount of money. All the richest people in the world became that way because of stocks they own. Either from a company they founded or other people companies.
Scalability: Similar to index investing, stock investing is very scalable.
Liquidity: Stocks are among the most liquid investments. Stock can be turned into cash in a short time without losing value.
Bitcoins, the flagship cryptocurrency, has open doors to many up and comers such as the Litecoin, Ripple and Dash. There is an investing possibility in these. Let’s see how it compares to the previously mentioned ideas.
Knowledge needed: Just like stock investing, the amount of information is high, but contrarily to stocks, cryptocurrencies are not companies, so there is no accounting and no financial statements. The analysis is based on other metrics related to the viability and sustainability of the currency. For example, the level of engagement of the miners or the developers. It can also be very difficult to do a solid investing decision because the technology is in its infancy and there is not much track record for any currency.
Potential Returns: Since it is a very new and promising technology, the returns could be extremely high. So is the risk. There are already many Crypto millionaires around the world, and I do not doubt that there could be more coming up.
Scalability: Depending on the cryptocurrencies, scalability may vary. You could probably buy a good amount of bitcoin, but it is safer to say that cryptocurrencies are not a scalable investment at the moment.
Start a business
If you bear an entrepreneurial spirit, there is potential on investing in starting a business or buying an up and running company.
Knowledge needed: Starting a business demands a whole array of skills. From financial management to problem solving, the list can be long. But if you have a vision, you can just start and learn along the way. The most important skill an entrepreneur must have is to be able to sell. If you can bring in revenue, you can start by partnering with trustworthy people to do the job and learn along the way.
Potential returns: Depending on the business you are in, the returns can be very high. When well managed, it can become a well oiled machine that is requiring a very low input from you.
Scalability: Almost all types of business can scale. Internet based business is obviously scalable, but even local businesses can scale using different techniques such as franchising or mergers and acquisitions.
Liquidity: Cashing out a business is not an easy and quick process. It may take years to conclude the transaction. On the other hand, some businesses can produce a lot of liquidity like service or internet based businesses where profit margins tends to be higher.
Invest in the real estate BRRRR model
Are you a handyman? You have the skills and the network required to flip real estate properties. The Buy, Rehab, Rent, Refinance, Repeat model may be something for you!
Potential Returns: You can make a great amount of money if you do your research and can find a great fixer upper in a good neighborhood. The bigger the property, the more potential return it may carry. Not only a successful BRRRR (pronounced “Burrr”) will produce a profit on the jump in value of the property, it will also create a cashflow revenue from the tenants that will rent it once you are done with your flip.
Scalability: The BRRRR model is mostly used on single family properties, but an investor can leverage the technique on many properties at the same time if you have the team and the financial leverage. Since it is much more complex to BRRRR at scale, I would qualify that its scalability is lower than most of the other investment ideas.
Liquidity: Real Estate is known to be one of the most illiquid assets there is. So do not expect to cash out a property quickly.
Investing through a peer-to -peer lending platform
You want to help others? Peer-to-peer lending allows you to do just that through a platform that carefully vet the borrowers and connect them to you if they meet your requirements.
Potential Returns: Returns are limited. According to the biggest peer-to-peer lending platform, the returns on investment fluctuate between 4% and 7%. You can increase the rate of returns by choosing to lend money to higher risk individuals or institutions. This can yield returns to the order of up to 20%, but you can also lose the whole investment if the borrower defaults on his loan.
Scalability: Peer-2-Peer lending is very scalable. The social lending platform is becoming more and more popular among borrowers, so there is no shortage in people in need of money. What is interesting about this kind of investment is the way it diversify the amount you are putting in. Let’s say that you put in $5000, your amount will separated in increments of $25 and lent to 200 different lenders. You can then decide the different criteria to manage the risk.
Liquidity: When you lend to a borrower and you set the time span of the reimbursement and the transfer is done, you cannot remove your money. So this type of investment is not liquid.
The three most popular peer- to-peer lending platforms:
- Lending Club is the market leader in the P2P lending industry. They are focusing on being more demanding in term of credit score for their borrowers.
- UpStart has a different approach that goes beyond the credit score and revenue. They are looking for the degrees attained, the employer and the schools the borrowers went to in their proprietary approval process.
- Prosper is a pioneer in the industry with over 16 billion dollars invested. They have help in connecting more than 960 000 borrowers so far. You only need $25 to get started.
Investing through a real estate crowdfunding platform
You have an interest in real estate but are not into managing tenants, working on renovations and analyzing properties? Real estate crowdfunding is for you!
Knowledge needed: Since there is no need to search for property to invest in (professional investors do it) the knowledge required is close to none.
Potential returns: The returns are good for the low level of knowledge required to get into this type of investment. According to the most popular platforms, returns can be as high as 10 to 11% annually. Note that they do not guarantee the returns so you can lose your money as well. So don’t put your eggs in one basket.
Scalability: Real estate crowd funding is very scalable, the private market real estate investing is BIG, and they can take practically any amount of money. The minimum amount to get started is 500$
Liquidity: Since you are lending money to professional real estate investors and that it goes either into loans or real estate equity, there is no way to cash out before the end of the term which can often be many years. So don’t look for such investments if you are looking for short-term cash out options.
- Fundrise is the most popular platform and allow you to invest in multi million dollar real estate projects
- Prodigy Network is give you access to private real estate project, focusing on big cities like Manhattan and Chicago. The minimum investment amount is $10 000
- Realty Mogul focuses on commercial real estate pride themselves in the quality of their deals.
Invest along an elite venture capitalist
You are interested in the promising tech startups, but are nowhere close to know which to choose and don’t have the silicon valley connections. There are platforms that help you invest alongside professional Venture capitalists (VC) who have the connections and the insider’s info.
Knowledge needed: If you want to succeed in seed investments in startups, it takes an enormous amount of knowledge and luck. Going through a professional VC increases your chances of success, but it is absolutely not guaranteed. Startup seed investing is incredibly risky.
Potential returns: Some of the VC you can join with were early investors in companies like Uber, Facebook and Twitter.
Scalability: This can scale. Investment minimums starts at a $1000 and there are packages for investors looking to invest $500,000 per year or more.
Liquidity: Investing in early tech startups is not like investing in the stock market. You are giving them money and you can’t cash out. It’s like a bet. VC funding is not a liquid investment.
Let a robot take charge of your money
You are not the Do-It-Yourself type with investments? You prefer to just put in the money and forget it? Robo advisors can help you do just that. They will take care of your assets allocation with surprisingly low fees.
Knowledge needed: You don’t need a lot of knowledge to get started with robo advisors. Just an overall idea of the risk level you’re ready to take, the timeframe of the investment and the money (of course).
Potential returns: Like all other investment types, robo advisors do not guarantee any returns. This is a very new product in the world of investing, so there is not as much historical data. In fact, robo advisors, at the time of this writing, hasn’t gone through any recessions yet. From the research I did, I saw that returns so far varied between 4% and 9%.
Scalability: Since the investments are done through the stock markets, robo advisor investing is very scalable. Just like stocks.
Liquidity: Robo advisors investments are like index fund investing, you can put and take your money pretty easily.
What Is a Robo-Advisor and Is One Right for You? by Nerd Wallet
Investing Ideas: Final Thoughts
Looking for ways to invest is not something to be taken lightly. To maintain the value of your money, you need to keep it growing to at least 3% per year to counter inflation. Otherwise, it will just make your cash melt like snow under the sun. Taking the time to select where to invest and how to diversify is something that will help in protecting your money. Hopefully, these ideas will be a great start to your investing journey.