Sunday, June 30, 2013

3 Best Ways to Build Equity Over the Next Five Years

Sometimes it's not enough to simply make money. Unless you want to see the money you earn disappear with no return, you'll need to look into ways to build personal equity.

Making smart investments that either build value over time or hold their value for a reasonable duration ensures you can actually spend money to make money. Here are a few of the best ways to build equity over a manageable, five-year period.

Purchase a Home

Intelligently investing in real estate is one of the surest ways to turn a small investment into a big payday down the road. A large or lavish home isn't imperative. With proper research, you can end up spending less on a decent condo investment than you'll spend on monthly rent.

You can also see a huge turnaround on a house that has seen its value plummet over resolvable issues, like worn paint or a dead lawn. Keep the property for several years and do what you can to improve the property without investing too much more money. After several years, put the house back on the market.

With just a few valuable improvements, you could see a decent return. Be careful, though -- the real estate market is volatile and neighborhoods can change over time. Be sure to thoroughly research both the property and neighborhood so you can avoid any future surprises.

Invest in Stocks and Bonds

The great thing about the stock market is that, while many of the highest payoffs come from the biggest risks, there are still safer stocks that can give you a decent return on investment through smarts and patience. Spend some time learning about stocks that interest you and don't be afraid to consult a broker or three. Once you find stocks and brokers you can trust, sink a few dollars into a smart investment and bide your time.

There is, of course, always the chance that your investment gets lost in the often unpredictable market, so start small so you can get your sea legs. And when it comes to bonds, keep your eye on interest rates -- these will affect the return you receive at maturity.

Purchase a Car

The key to making the most out of your automotive investments is buying vehicles that keep their value. Aside from those cars that will eventually become sought-after vintage models, all vehicles depreciate in value. In this case, it's not about identifying an investment that will turn you a profit in a few years, but finding a good place to spend money where you would spend it anyway.

If you must drive, make sure industry projections show that the car will retain its value for several years and with minimal depreciation. For example, the 2014 Ford Fusion is at the top of the list of current cars slated to hold value for several years to come.

Whether you're aiming for property, stocks, or more obscure investments like precious metals, it's essential to do your research and think long-term. Ask experts how your investment might change over time. Consider the benefits and drawbacks, and whether it's about making money later or saving money today.

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