Sound Investment: a Financial Exit Strategy

They say that you should invest during a bear market. But this is not necessarily correct. The risks are exceptionally high during this time. Likely, you will not get your investment back. What we recommend is for you to review all factors before investing.

The pandemic showed us our financial vulnerability. It compels us to reevaluate our retirement plans. If we find our retirement arrangement lacking, we should immediately act on it. But how should we remedy our monetary woes?

Allow us to enumerate the ways on how to redress your financial vulnerability. We must warn you that results may vary, so kindly exercise caution. We also suggest that you practice due diligence. Doing this will lessen your monetary exposure.

Real Estate

The topmost of our list is real estate investment, especially the one that involves land. If done correctly, it will pay for itself. It also poses the possibility of passive income. Best of all, you can hand this property down to future generations.

You might be wondering why we specified land acquisition. We did so because the land is the only long-term, tangible asset that does not depreciate. But should we invest in real estate property during this volatile economy?

Time reported earlier this month that mortgage rates are still low. This article also mentioned that properties are a bit pricey. If you want to quickly recover your investment, you can flip your acquired real estate. It may necessitate a few repairs on the plot, so you will be spending money to make money.

a small diorama of a house covered by two hands

First, have the property thoroughly inspected. Doing this will ensure that you will be selling something of excellent quality. According to Forbes, the kitchen and the master bathroom help sell the home. In this case, it makes sense to pour more money on these rooms than on other parts of the house. But it is prudent to keep these improvements within 6-10% of the gross price.

Let us say that in the course of the checkup, the inspector found some roofing issues. If the problem is extensive, you can ask the general contractor to use corrugated plastic roofing materials. It is an economical solution to the roofing concern. You can divert the savings to kitchen improvement.

This investment requires a lot of balancing act. But if you get it right, you can stand to make a lot of profit. Whether you will flip the property or get it rented, you need to spend more to ensure that it will not become idle.

Financial Instruments

Let us discuss the purchase of financial instruments. Financial experts consider this type of investment as low risk. But still, practice caution.

Before anything else, allow us to differentiate financial instruments and negotiable instruments. Both are assets. The former is the result of a company’s efforts to raise capital. On the other hand, a negotiable instrument rises in the regular course of operations. Most entrepreneurs do not accept a negotiable instrument unless they know the person.

The most common examples of financial instruments are bonds and stocks. You can hand either of these down to younger generations. But bonds are safer than stocks because the corporation will pay the bondholders before the stockholders if they dissolve the company.

There is another type of financial instrument that shares some characteristics of bonds and stocks. It is the preferred stock. Some experts argue that this is a liability because once a company is dissolved, the administrator pays preferred stockholders before common stockholders. But its interest rate is slightly higher than bonds.

Whether you will buy bonds or stocks, you need to review the company’s consolidated financial statement. We highly suggest that you ask for this type of document because it covers several years. The format allows you to compare the numbers. You could easily see a pattern in this type of financial statement.

CNBC published an article last year that most people are shopping online. This information piqued your interest in the retail industry. You reviewed a handful of companies but found only two entities interesting.

The first one offers their shares at a low price. But upon reviewing the consolidated financial statement, you noticed that it filed losses for the past four years. The other one has a slightly higher asking price. But it has continuously paid dividends to its investors. Which one will you choose?

Prudence dictates that you purchase the latter. This situation also illustrates why you should not immediately jump on board the investment train during a bear market. Study all factors before making any decision.

One of the lessons that we learned during this pandemic is that we can never predict the future. Some may have foresight. But it is not 100% accurate. With this said, the best thing that we can do is to prepare for it.

 

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