The investment objective is to earn a return on your capital within a specified time frame. The shorter the time frame, the higher the return, the higher your compounding result will be each year. Investors focus on getting the largest possible compound each year with the least possible risk.
This risk factor defines the quality of an investment. A quality investment is, of course, an investment where you actually get back your initial capital, as well as a percentage margin on top of that capital. So the best ways to invest money are those in which there is very little or no risk.
There is no such thing as a zero risk investment, there is always some risk. Even the investment of putting your money in a bank involves at least some small element of risk. This is considered by most investors to be the safest investment of all because a bank is a certain type of business that is actually backed and guaranteed by the government.
So a bank deposit is the best way to invest your money, if you have several million dollars. The single-digit yield makes it impractical as a source of passive income for investors with less than a million dollars because the returns are too small to live on. But for large capital accounts it’s still the safest place to park money.
The next safest investment is real estate because, unlike the stock market or mutual funds, your money leaves your hands but you receive something of tangible value in return. This is pretty significant, because if you compare it to the stock market, you get nothing more than a receipt for a stock investment. This receipt is an acknowledgment but has no intrinsic value in itself. The actual paper document you receive is worthless.
What this means is that the risk is out of your hands to control it. You have passed the money on to someone else, and the ability to control risk is completely absent. Control and risk are very closely related, so when that control is relinquished, the risk factor increases significantly.
The last best way to invest money is a real estate move, however it can be used even with small capital accounts. Real estate entry costs are large, you need a deposit, you have legal costs and other associated expenses. However, you can also invest in investment objects that match your current level of starting capital. For example, you could easily buy common goods that are incorrectly priced and sell them at a profit. This type of transaction can occur as quickly as a week, and the yield can be quite high. This ability to quickly deliver an investment has powerful ramifications on a portfolio. If you can buy something for $100 and sell it for $140, that’s a 40% margin, if you can do it in a week, you have a good investment model if you can sustain those levels of capitalization. $100 becomes a million dollars in just 28 such transactions.