6 ways to get capital gains
There are basically two types of investment income. Capital gains and investment income.
Investment income is the income you receive from an asset, examples of investment income are interest on savings, rent on property, and dividends from stocks.
Capital gains are the increased value of an asset; Examples of capital gains are the increase in the value of property, stocks, and other assets.
Some investments provide capital gains but not income; Examples of these are precious metals like gold, bitcoin, antiques, and other collectibles.
Here are the investments that provide capital gains:
The stock market
The equity market offers excellent opportunities for capital gains. For most people, investing directly in the markets is not an option because the transaction fees once charged for buying and selling stocks make it not worth it, however there are many managed funds in which investors with limited means can participate. Stocks in New Zealand are one. Investors can trickle money into the markets with Shares and there is the option of investing in multiple funds or individual companies. Other similar types of platforms in New Zealand are Investnow, Kernelwealth and Hatch. However, these are not the only ones.
Your retirement plan invests in managed mutual funds and they are also a form of capital gains. In New Zealand joining Kiwisaver is a no-brainer. Kiwisaver is New Zealand’s retirement plan.
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 is obtained from the income of which country for the mortgage. All related costs are the most popular form of capital gains and the easiest for the novice investor to get their feet wet in the markets and learn on the go because there are multiple mutual funds available and the startup costs are minimal. In New Zealand, stocks only cost $ 1, giving you the opportunity to invest in managed funds or individual companies. It is a great way to deduct taxes. This type of investment can turn into custard like wayward tenants. If you are prepared to take the risk, this investment may be suitable.
Your own home is a good source of capital gains if you intend to sell it at some point.
Another way to get on the property ladder is to buy shares in real estate investment companies on the stock market. This can be done by investing in sole proprietorships or managed funds that invest in property.
You must have heard of compound interest; that is, when you invest in fixed-term accounts with an interest of x%. Instead of receiving your interest payments in your bank account, you allow them to add to your principal and earn interest on your principal and previous interest payments. This is called compound interest.
The increase in your capital is called “Capital Gains”.
Interest rates are very low today (2020); in some cases lower than the inflation rate, which makes this type of investment less attractive. Therefore, it is important to do your due diligence and not be seduced by some financial company that offers higher interest rates than normal, because with higher interest rates you carry a greater risk. These higher interest rate finance companies lend to riskier borrower types.
I’m not saying that you shouldn’t invest your money in these companies, but rather do your due diligence and at least diversify your portfolio instead of investing all of your life savings in one company.
This is purely speculative, but it can be a good hedge against a recession in the markets. The only downside to gold is finding a place to store it. Another way to invest in gold is by buying gold stocks on the stock market. Buying gold coins on auction sites like eBay and Trademe is another option. As with other investments, it pays to do your homework and read everything you can about gold and other precious metals.
Cryptocurrencies like Bitcoin and the like should be treated as speculative investments, therefore only invest money in this if you can afford to lose it. What I’m saying is use your discretionary income to buy cryptocurrencies. This type of investment can be a roller coaster, but a tip that can be useful is not only to buy all your cryptocurrencies in one transaction, but to do it on a weekly, biweekly or monthly basis so that there is the possibility that you have made a purchase when it is currency is low. It’s called averaging.
Collectibles / Antiques
Investing in collectibles can give you a sense of satisfaction and profit when you intend to sell. You really have to know your stuff when it comes to antiques. Always remember, something is only worth what others are willing to pay. If someone is willing to pay $ 1,000 for a painting at auction, that’s what it’s worth, however if another painting sells at auction for only $ 10, then it’s worth it. The value of something is just a matter of opinion.
Recently (2020) some Banksy paintings sold for over $ 100,000 in New Zealand. The seller of the paintings paid a total of $ 500 for them in London, UK, a few years earlier. It just shows how the eye for a bargain can be profitable.
For smaller items like postage stamps, banknotes, beer labels, etc., collectors can list their duplicates on auction websites to help fund their hobby.