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Potential Investments

This is Not Investment Advice Just A List to Consider

While I can’t give specific advice as everyone’s situation, choices, risk tolerance and taste varies markedly, I can give a rundown on a number of investment possibilities and my opinion on them. I have ordered them by Entry Cost to show potential paths to balance sheet growth.

 

Please remember to do your own research.

A List of Potential Investment Choices

 

Entry Cost

Risk

Return

Effort Level

Gearing

Comments

Bank Savings

Very Low

Low

Very Low

None

None

Usually insured funds so if the bank is robbed you would get most of your money back. A good storage point before investing.

Government Bonds

Low

Low

Very Low

None

None

Very safe in developed countries, but low rates of return are only good for very large balances.

Unit Trusts

Low

Low

Low-Medium

Low

Low-Medium

Sit back and let an expert to do the hard work of trading. You can trade just about anything. Returns can sometimes be up to 30% p.a. and can be geared. Just watch out for market crashes after a huge boom because they can lose money as well.

Retail Business Ownership

Low

Medium

Medium

Medium-High

Low

Stiff competition, high overheads and tight margins, but with the right business model and product range you could do ok. A niche market, a franchise, and/or particularly good service really makes the difference.

Service Business Ownership

Low

Medium

Medium-High

High

Medium

You can basically start from a home office and grow. You must be an expert in the field and customer service is the most important aspect.

Silent Business Ownership

Low-Medium

Comment

Comment

Low

None-Low

Higher risk than running the particular business yourself as you are not involved in the decisions. Lower entry cost (a share in the business). Lower effort - just monitor and collect.

Shares

Low

Medium-High

Medium

Low-Medium*

Low-Medium

A volatile market based on greed and fear. Requires a growing market to make money and dividends are modest and temperamental. Blue chip stocks are the safe bet.

Foreign Exchange Trading

Low

High

High

Medium-High

High

Very risky and should be paper traded to death before entering a real market. Unlimited risk if stop losses are not used. Day trading lucrative and extremely volatile.

Racing Industries

Low-Medium

Medium

Medium

Medium-High

None-Low

Horses, dogs, etc. A tough business even for the expert. Although owning a silent share could be worthwhile. Owning great breeding stock is key.

Artist (Musician, Writer, Actor, Model and Visual Arts)

Low-Medium

High

High

Medium

None

Great if you have vast talent or can spot and hang on to talent (agent). Otherwise don’t bother.

Residential Property

Medium

Low

Medium-High

Low

High

A buy and hold strategy will yield medium returns for a long time. Development is riskier but skilled people can make great returns. The high end of the market is driven by emotion. A great place to store wealth and earn income from rent.

Commercial Property

Medium

Medium

Medium

Low

High

Requires a good knowledge of property. You could lose your shirt if sloppy. More cashflow than growth. Potential for long periods of vacancy.

Industrial Property

Medium

Medium

Medium

Low-Medium

Medium-High

Requires a good knowledge of property. You could lose your shirt if sloppy. More cashflow than growth. Potential for long periods of vacancy.

Franchise Business Ownership

Medium-High

Low-Medium

Medium-High

Medium-High**

Medium-High

Depends on the business type as above, but potentially better returns and less risk, but can still fail. Higher startup costs. Employs brand recognition and a franchised business model.

Special Operating Licence

Medium-High

Comment

Comment

Low

Comment

Too many variables. The service needs to be in demand with short supply and have unregulated or high prices. E.g. Taxi, crane, earth moving, pilot, firearms, security clearance, etc.

Futures Trading (Options, CFDs, Warrants, other Derivatives)

Medium-High*

High

High

Medium

High

Requires vast paper trading to master the countless strategies. Very rewarding for the highly skilled. Unlimited losses for the unprepared.

Prospecting

Low-High*

High

Medium-High

High

None-Low

Highly speculative, risky and time consuming. Needs specialist knowledge and technology to find a huge strike, otherwise modest returns over the long haul for a single person.

Invention

Low-High*

High

High

High

None-Low

Taking science and turning it into a usable technology.  Can require vast tooling, licences and time to create groundbreaking tech, although if you are particularly talented and know human nature you could make the next Rubik’s Cube for a modest outlay. Can be fickle and a money pit.

Wholesale Business Ownership

High

Low-Medium

High

High

Medium

More lucrative than Retail but you will need a strong product range and a strict / sole distributorship over a fixed and known area. You will need to have a high level of business understanding. High startup costs.

Manufacturing Business Ownership

High

High

Medium-High

High

Low-Medium

Very risky as products have short life cycles and the consumer demands innovation. Strict business cases are required, stiff competition, solid patents, massive tooling, large staffing and production costs, high minimum production volumes. iPod a great example of success.

Agriculture Business Ownership

High

High

High

High

Low-Medium

You need training, solid market knowledge, high work effort, and sound business and finance management skills to excel.

Research and Development

High

High

High

High

Comment

Pure science revealing the nature of things around us. Time and resource intensive. Requires exceptional minds and knowledge. Gearing depends on a business case and ROI. Potentially big money from patents, but no guarantees.

Rare Collectables

Very High

High

High

Low

Comment

You must be intimate will the area of interest. Fraught with forgeries and theft. Gearing depends on a business case and ROI.

 

* Depends on the method utilised / area of expertise.

** Depends on the business model. A good model allows automation of people and services while the owner can just monitor and administer.

Further Reading