Oftentimes, we get sick and tired of the everyday grind. We wake up, go to work, come home – and repeat. It’s hard, especially when the spirit of envy seeps into your inner core and you wish you had the money of a Warren Buffett, a Jim Rogers, or a Kevin O’Leary. Yes, we have all been there – the times of frustration, anger, and disappointment.
While you may not get the money of a Buffett or Bill Gates tomorrow, you can still make your money work for you. It might not be enough to just clock in eight hours a day, transfer five percent of your earnings into a no-risk savings account every week, and wait to retire to grab your Canada Pension Plan cheque.
It doesn’t have to be this way. You can do so much better. How? By employing one or two investment strategies that do carry some risk, but they can ensure you’re doing a better job with your cash. The best investment strategy will make you money, enough money to boost your quality of living by a significant amount.
If you are looking for the best investments to make money, here are the seven best investment strategies that make your money work for you:
Strategy #1: Living Off Investment Dividends
There was a story a few years ago of a gasoline station attendant who died a millionaire. Ostensibly, he invested in blue chip stocks and made a fortune from the dividends. This is your primary endgame when you’re an expect investor: live off of the dividends in your winter years.
A dividend is a payment you receive each quarter from the stock you parked money in. For instance, if the company pays three cents a share, and you own 5,000 shares, then you will make $150 every three months. This could grow if the company increases its dividend.
Dividend investing is one of the best investment strategies because if you own a value stock that hardly budges over time, you want a comfortable quarterly yield to make money.
Strategy #2: Max Out TFSA Investments
For the last decade, the federal government has allowed you to keep the interest on your savings and investments up to $6,000 (2019). A tax-free savings account (TFSA) is a great tool that can be used for general savings, mutual funds, and stock trading.
For the most part, if you are not much of a serious investor, then a high-interest savings account in your TFSA is a great option, especially with the Bank of Canada (BOC) gradually raising interest rates.
Moreover, if you don’t have a lot of cash by the end of the month, then a TFSA allows you to incremental build your net worth. If you want the best investment strategy to make money, the TFSA should be on top of your investment list.
Strategy #3: GIC Laddering
Guaranteed investment certificates, or GICs, are becoming great again thanks to rising interest rates on the part of the central bank. You can buy a 90-day, one-year, or three-year GIC, but then you’d risk losing out on inflation. So, what’s the solution? GIC laddering.
This is how it works: When each term matures, you reinvest the new amount (principal and return) into a five-year GIC term. That’s all you need to do. Guaranteed Investment Certificates are among the best investments to make money safely with little risk involved.
Strategy #4: Event Trading
Event trading is a great way to make quick cash. However, it only works if you know how markets work, if you pay close attention to the world, and if you have the cash to buy large sums of stocks or exchange-traded funds (ETFs).
Here are a couple of recent scenarios:
- The partial U.S. government shutdown left thousands of workers in financial trouble, leading to furloughed civil servants to use payday loan establishments – stocks of these firms surged.
- After the Brazilian leadership was found guilty a couple of years ago, bullish Brazilian ETFs soared.
- When bitcoin rose to prominence and saw its value skyrocket, Advance Micro Devices (AMD), which develops microchips for computers, climbed from a few dollars a share to as high as $23.
These are only some examples of event trading.
Strategy #5: Passive Investing
Passive investing is one of the best investment strategies because not everyone has the time to carefully peruse the stock market every hour of the day. What many people do is just buy mutual funds, a few value stocks (like Wal-Mart or Loblaw), and perhaps a GIC and check on it every couple of months or so. And this works.
Strategy #6: Stock Picking
On the other hand, there are some investors who love the thrill of picking stocks and then experiencing a 15 percent spike after a couple of months. There is no other feeling like it. But this only works if you understand how the market functions, what stocks to look for, and, again, if you have the principal without turning to credit markets to fund your foray into the Toronto Stock Exchange.
Strategy #7: Diversification of Investments
Finally, we get to every financial expert’s recommendation: diversification.
A diversified portfolio can protect you in any market and make your money work for you in any environment. Everyone’s diversified portfolio varies, but here is just an example of what you should expect with such an investment strategy:
- 40 percent savings.
- 25 percent mutual funds.
- 20 percent GICs.
- 10 percent dividend stocks.
- Five percent bullion.
Of course, your risk aversion, your principal, and your investment goals will create an entirely different type of portfolio. You may be equity-heavy or bond-heavy – it is entirely up to you.
In today’s landscape, investing is a luxury that so many households do not have. Because half the country lives paycheque to paycheque and most Canadians do not have appropriate savings, investing seems like a distant dream. But it doesn’t have to be. Why? You can start small and eventually make it big. You can begin with savings and work your way up to dividend stocks. It’s a long journey, but every journey begins with that first deposit.