Increase your money – Beyond the savings account
The investment departments of some internationally operating banks caused a global economic crisis in 2007/2008 by an adventurous mix of financial derivates. The consequences are felt until today. One of these is the interest rate policy.
The purpose of this adherence to the interest rate policy and the simultaneous buying up of government bonds is to persuade companies and private investors to inject their capital into the economy, thus stimulating it.
Money is hoarded in savings accounts doesn‘t contribute to reviving the market. Already in May 2009, the so-called main refinancing rate, colloquially key interest rate, was lowered.
Anyone who keeps his money in a savings account or hides it in cash at home is losing money. Currently, the inflation rate is around 2%.
The banks give at best 0.6% interest per annum on savings. Multiplying money has to be done differently. There are certainly safe money investments that make more of your money. More about them, and what should be avoided, you will find out here.
Increasing money without risk?
Thinking conservatively is usually not bad at all. If something has worked for decades, then it cannot be faulty. However, this has changed with the banking crash in 2008 and the subsequent rate cut. Traditional savings make losses.
On the other hand, private investors in the U.S. are very skeptical about other forms of investment. In recent times a cash deposit at home – has become popular again. Much to the delight of professional burglars who do very nicely out of it.
Besides, U.S. residents suffer from the somewhat fatal tendency to seek financial investments that the investor or saver needs to worry about as little as possible. Thus a savings account was an ideal solution, but at least in the near future this is no longer an option and interest rates were never really intoxicating.
Thinking of equities, not a few investors immediately recollect desasters like the bursting of the internet bubble that caused overnight losses of unbelievable amounts of money. But there are alternatives.
The magic word is called ETF.
An exchange-traded fund, or ETF for short, is an investment fund that tracks the performance of certain stock indices. Stock indices are summaries of several, sometimes hundreds or thousands of different company shares that show the average performance.
The most well-known stock index in the United States is the Dow Jones. Another popular index is the NASDAQ.
At the founding of the Dow Jones started at zero in 1928 and now stands at nearly 22,000 points or more than 9,000% in value increase.
Converted to the single year, this means on average for the Dow Jones a total value increase of 101% per annum.
With an ETF savings plan, these value increases can be easily and, above all, safely traded. You do not have to be George Soros or Warren Buffett. Especially direct banks offer free online depositories into which one has to pay 25 or 50 USD a month.
The return depends on the performance of the replicated index. The MSCI World for example is a very secure index because it is broadly diversified.
It summarizes about 1600 companies. The MSCI World has achieved an average annual return of 7.1% since 1970. That's a bit more than 0.6% on the savings account and still a very cautious investment.
How do I double my money?
Increasing money is one thing, doubling the money, and in the shortest possible time, is something else entirely. Of course, the majority of private investors would like to have the all-in-one solution, which is 100% safe and also yields a very high return.
At the same time there is much admiration for financial jugglers who make huge profits with risky options trading, but also accumulate gigantic losses if speculation on rising or falling prices goes awry.
These are insiders, brokers with listing, who usually do not invest their own money but that of their clients. Why investment strategies sometimes go awry is often related to human emotions.
To cope with this problem, computers were used 20 years ago by professionals to predict price movements without feelings involved.
Today this tool has become available to non-professionals and is called Robo-Advisor or robot adviser. Robo-Advisors have two advantages. They are much cheaper than a human investment consultant, and their investment strategies are free of fears or elation.
The investments suggested by the Robo-Advisor to the client are based on pure data from the near or farther past. Special algorithms are used to analyze the existing risks and chances of success.
What‘s a real Robo-Advisor?
Typically, these are web platforms such as Betterment, Walthfront or Personal Capital, where clients receive investment strategies according to their risk appetite.
Since most of the platforms work preferably with the already described ETFs, there is little danger of gambling away hearth and home.
On the contrary, the average performance of the Robo Advisor in recent years shows that they are at least equal to their human colleagues, in most cases even superior. A good example for the functionality of an investment strategy are times of crisis.
This happened last in 2016 with the rapid decline in oil prices, which caused huge fluctuations in share prices. The Robo-Advisor proved that it is wise to keep a cool head and do what ultimately brings the best result.
They recommended buying low-rated ETFs instead of getting out of the investments. In fact, the prices rose again rapidly. With a certain willingness to take risks, such times of crisis are very well suited to more than double your money.
The robotic consultant lends a helping hand without astronomical fees.
Make a lot of money out of little money
If you want to achieve a lot, you have to take risks. With some investments, this doesn‘t mean everything or nothing, but nothing that‘s even less than nothing. For example, in options trading, which works with great leverage, but in both directions.
If you do not want to get involved in such adventures, you can still try direct investment. There are various possibilities for this. One of them is cryptocurrency, of which Bitcoin is by far the best-known form of the new digital currency.
Bitcoin is also the first digital money to have a real and verifiable market value. The basis for this is the underlying technology, the blockchain. Many experts consider this technology the most promising systems, which will change more than the financial traffic.
When Bitcoin hit the market in January 2009, it was barely noticed for the first 4 years. Its value started to rise slowly in January 2013 and then exploded in mid-year, within just one month, from around $ 200 to $ 1,200.
After that, however, it went downhill again. In 2015, Bitcoin was at $ 250. The end of 2015 and the beginning of 2016 marked the rise of Bitcoin, which was at 20,000 USD before the end of the year 2017. Anyone who had the right instinct and got into Bitcoin in 2010 can make a very substantial profit today.
However, Bitcoin is still a speculative and risky thing. The biggest problem may be that the Bitcoin defies state control, which will eventually call up the monetary authorities.
Bitcoin is the best-known, but by no means the only cryptocurrency. There are now more than 840 digital "coins", such as Ethereum, Ripple, Bitcoin Cash or Litecoin. A wide field for speculation with cryptocurrencies.
Multiplying money systematically
The classic investment options, such as call money or a timed deposit account, are not convincing anymore simply because of the current interest rate policy. Real estate was and still is a good investment if certain rules are followed.
Demand for housing is on the rise, especially in metropolitan areas. During the coming years this will cause a lot of construction and investment.
Precious metals are the absolute investment classic. The world's first currencies were almost always based on the precious metal gold.
Now gold may be kept at home, but this poses the risk of total loss by burglary. A bank deposit costs extra money. Another way to profit from the gold price is to buy bonds and stocks from companies that trade gold or use it in production.
Gold is not an investment that can make quick profits, but it is a metal that has just been upgraded with the advent of new digital technologies. This is due to the special properties of gold, which is extremely conductive and at the same time not susceptible to corrosion.
In smartphones, in tablets or in many other devices, gold is guarantees for lasting conduction. Especially in the micro range, where it is about a thousandth of a millimeter or even millionths of a millimeter, the nanotechnology, gold is unbeatable. Incidentally, gold jewelry is increasingly in demand again, the first historically proven and still much favoured use of the precious metal.
New technologies are often accompanied by the slogan "rare earths". These are special metals and minerals preferably used in semiconductor and processor manufacturing, but also in the production of novel accumulators like for electric cars.
It is a steadily growing but very complex market, dependent on a wealth of political and economic decisions.
Remains to mention stocks, the share certificates in a company. The range goes from penny stocks to blue chips. A share can be worth 10 cents, but also more than 1000 USD.
For you as a generally inexperienced investor, someone who’s not really supposed to have special knowledge of the capital market, it is important to diversify widely in order to minimize the risk. Nevertheless, a good return is the objective.
ETFs are certainly well suited for this purpose, especially as they guarantee entry even with little capital. If you dare, you can invest in direct investment, but always at the risk of total loss.
Today those who want to increase their money have more options than ever before. On request, just as safe as the savings account, but showing a much better result at the end of the year.
Conclusion about how to increase money
Multiplying your money through your own abilities. That's the norm. As an employee, self-employed or freelancer. But the accumulated money should continue to increase.
It should work for you. This is justified for a variety of reasons and is by no means just pure greed. In many countries the provision for old people incapacitated for work is based on investments, on pension funds – thus on saved and invested money.
That's one thing. On the other hand, savings are used to make purchases.
So why shouldn’t the money set aside for this goal be invested so that it multiplies in the meantime? Investments help finance the training of young people and keep the economy going.
Increasing one’s money is not just the desire to have more and more, but the need to protect yourself and your family.
Of course this does not justify speculation on commodities such as food. But it is up to each individual to decide how to invest the money earned.
The tools for this are found in almost all households – a computer and internet access.
Further reading: Becoming a Millionaire – Can Anyone Achieve That?