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6 ways to make capital gains
There are basically two types of investment income. Capital gains and investment income.
Investment income is income you receive from an asset, examples of investment income are interest on savings, rent from property, and dividends from stocks.
Capital gain is the increased value of an asset; Examples of capital gains are the increased value of property, shares, and other assets.
Some investments provide capital gains but not income; Examples of these are precious metals such as gold, bitcoin, antiques and other collectibles.
Here are investments that offer capital gains:
Share Market
The stock market provides excellent opportunities for capital gains. For most people, investing directly in the markets is not an option as one-time transaction fees are charged for buying and selling shares, making it not worth it for them, however, many managed funds with limited means Investors can participate in it. New Zealand is one. With ShareC investors can put feed money into the markets and have the option of investing in different funds or individual companies. Other similar platforms in New Zealand are InvestNow, KernelWealth and Hatch. Although they are not alone.
Your retirement plan invests in managed (mutual funds) and they are also a form of capital gain. Joining KiwiServer in New Zealand is a no brainer. Kiwisaver is New Zealand’s retirement plan.
Property
The property market has been a popular Captain Gains tool for a lot of investors, who use not only their own money but other people’s money as loans. The income is derived from the rent which pays for the mortgage. All associated costs are the most popular form of capital gains and it is easiest for a novice investor to get their toes wet in the markets and learn as you go as there are many mutual funds available and start-up costs are minimal. It only costs $1 to enter shares in New Zealand, giving you the opportunity to invest in managed funds or individual companies. This is a great way to get tax-deductible. This type of investment can turn into a custard like a wayward tenant. If you are ready to take the risk then this investment can work for you.
Your own home is a good source of capital gains if you intend to sell at some point.
Another way to get on the property ladder is by buying shares in property investment companies on the stock market. This can be done by investing in managed funds that invest in individual companies or assets.
compound interest
You must have heard of compound interest; That’s when you invest in fixed term accounts for x% interest. Instead of receiving your interest payments in your bank account, you allow them to be added to your principal and you earn interest on your principal and past interest payments. This is called compound interest.
An increase in your capital is called a “capital gain”.
Currently (2020) interest rates are very low; In some instances it is less than the rate of inflation which makes this type of investment less attractive. Therefore it is important that you do your due diligence and do not fall prey to any finance company offering higher than normal interest rates, as with higher interest rates comes higher risk. Offering high interest rates, these finance companies lend to high risk borrowers.
I am not saying that you should not invest your money in these companies, but at least diversify your portfolio instead of investing all your hard work in one company.
Sleep
This is purely speculative but can be a good hedge against falling markets. One drawback with gold is finding a place to store it. Another way to invest in gold is by buying gold shares in the stock market. Another option is to buy gold coins from auction sites like eBay and Trademe. As with other investments, it pays to do your homework and read all you can about gold and other precious metals.
crypto currency
Crypto currencies such as bitcoin and the like should be treated as speculative investments, therefore, invest in them only if you can afford to lose them. What I am saying is use your discretionary income to buy cryptocurrency. This type of investing can be a rollercoaster but one piece of advice that can be useful is to not buy all of your crypto currency in one transaction but on a weekly, fortnightly or monthly basis so that you have a chance to Bought when it was low. This is called the average.
Collectibles / Antiques
Investing in collectibles can give you a sense of satisfaction and profit when you intend to sell. You really need to know your stuff when dealing in antiques. Always remember, something is only worth what others are willing to pay for it. If someone is willing to pay $1,000 for one painting at auction, it is worth it, however, if another painting sells for just $10 at auction, it is worth it. The value of something is only 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 ago. It just goes to show how profitable one’s eye for a bargain can be.
Collectors for smaller items such as postage stamps, bank notes, beer labels, etc. may list their duplicates on auction websites to help fund their hobby.
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