You've heard of stocks and bonds, I'm sure of it. But for the majority of my clientele, they haven't heard of this other investment vehicle: REITs.
What are REITs?
REITs stand for Real Estate Investment Trusts.
They are a great way for young investors like you and I to get involved in real estate when we don't have enough money to invest in a condo or house at this age.
Why should I buy a REIT?
Have you noticed how a majority of people's wealth is a result of their dealings within real estate? I've noticed a lot of my mentors and people I look up to have built their wealth and life thanks to real estate, saving and investing, and building quality businesses.
REITs are a great way to get exposure to real estate with its income and growth.
How do I make money from REITs?
They provide a monthly return in the form of rent. Over time, they provide capital growth with land values growing.
Remember: there is only so much land on Earth. As long as there are people and population growth, the basic need for shelter will continue to propel the demand for real estate.
What are the advantages of REITs than to purchase physical real estate?
Bonds! What are they you ask?
Well, by definition, a bond is:
So when you look at it like this, when talking about investments, a bond is a debt instrument that allows one party to borrow money from another. This is a legally binding agreement that allow borrowers to raise money for their businesses. Bonds can be from the government, municipalities and even corporations.
So why would I buy a bond?
With bonds, you are promised to be paid back for the money you lend out, plus interest.
Think about your investment like this: I give you $10,000 of my money. You promise me a 5% interest rate paid yearly for 5 years. You will pay me this $500 interest per year for 5 years, and when it is done, you must pay me back the original $10,000 you borrowed from me.
I just turned my $10,000 into $12,500 after 5 years. Not bad!
Buying bonds are a great way to secure your hard earned money while earning a great return in the form of interest income.
What are the risks of buying a bond?
Stocks! You've heard of them, I'm sure! But do you really know what they are?
This post gives you a quick briefing on what stocks are. Ready?
What is a stock?
A stock is an investment security that represents ownership of a company. When you buy stock, you become an owner and investor in that business. You are now what they call a shareholder.
Stocks are also known as shares. When you buy shares, you are buying pieces of the company to own.
Why should I buy stocks?
When you become an investor and owner of a business, you are entitled to your share of the business profits! When the company makes money, you make money! When it loses money, you do too. But those are risks worth taking when you are a business owner.
How do I get my share of the profits?
TFSA: sounds fancy. The financial institutions will tell you to open a TFSA and it's TAX FREE, but do you really know what it's all about?
What is a TFSA?
TFSA stands for Tax Free Savings Account. In 2009, the government of Canada introduced a new way for Canadians to save money for retirement, a rainy day and more. But it's so much more than a "savings" account.
You can invest in a TFSA!
Although the name includes the word "savings", this account is a solid account for investments. Whether you invest in mutual funds, ETFs, stocks, bonds or REITs, this account can help grow your savings on a tax-free basis!
Wait, so what do you mean by tax-free?
Each year, as of 2017, you can contribute $5,500 of your hard earned cash into your TFSA. From there, any dollar made or lost inside of the account can be withdrawn at any time without paying taxes on it!
If you remember my post about saving $3,600 a year, you could invest that amount into a TFSA and grow it over time. By not paying tax on your earnings, you grow the account faster than if you had a normal non-registered account.
Learn what a TFSA is in 2 minutes!
What is a TFSA?
It's a tax free savings account! You can save and invest with this account on a tax-free basis!
What can I do with this TFSA?
You can save cash in this account! But a more useful approach would be to save cash and then invest it routinely and frequently.
Why should I invest in a TFSA?
Think about investing $10,000 into a TFSA. You make 10% in the year. You made an extra $1,000! Do you like paying taxes? No, I didn't think so. With a TFSA, you get to keep all $1,000 of profits! The government let's you grow your assets in this account in a tax-free way!
What can I invest in?