Five Significant Investment Models to Increase Purchasing Power

By: The Industry Outlook Team | Tuesday, 14 July 2020

2020 has been one of the worst years in the history of this recent era. Not only millions of people are suffering from COVID-19, but every country around the world has been witnessing its economy tumbling even further down. Hence, it has been an utmost necessity for people to invest on other source of income which can get one through these hard times and secure a better future for the coming tomorrow; proper investments can significantly aid people to grow their wealth and increase one’s purchasing power over time.

As Dave Ramsey once said, "Financial peace isn't the acquisition of stuff. It's learning to live on less than you make, so you can give money back and have money to invest. You can't win until you do this." So Investment is can be the perfect way that one can bring the needed money flow in their lives and increase their purchasing power.

While coronavirus still holding it’s vice grip across the whole world which has caused critical disruptions across all the market segments, it has become crucial to balance potential gains with the risk involved to invest on something which can build wealth further. One can opt for investments that have lower-risk but pay modest return, or else, one can take on more risk and aim for a higher return. There are various types of investments, from Long-term financial goals, short-term objectives, to some facilitating tax savings. Also, there can be two types of investments – financial investments which include money that are being invested in Banks, Fixed Deposits, and Mutual Funds and other being Non-Financial investment which include investments that are done in real estate, gold, among others.

Here are some of the better options when it comes to profit making investments:

1. Money Market Accounts
Money market accounts are FDIC-insured and can be defined as the interest-bearing deposit account which offers higher interest than savings accounts. But however, it will require higher minimum balances. Money market accounts are great options for people who might face emergency – which everyone does at some point of time – as they offer liquidity and earn higher yields. This investment is one of the better options for beginning investors. However, a critical threat for these kinds of accounts would the risk of inflation.

2. Government Bond Funds
In Government Bond Fund, one can invest in debt securities where the investment instruments would be T-notes, T-bills, T-bonds and also the mortgage-backed securities. Its best benefit would be the fact that it is regarded as the safest model, as it is backed up by the government itself. However, here, if inflation rises, purchasing power can decline.

3. S&P 500 Index Funds
A good alternative for a mere traditional banking products would be S&P 500 index funds if someone wants to achieve higher returns. This fund system is based upon the 500 largest American companies, which means that it will certainly comprise many of the giants in the world of business today. This S&P fund offers an immediate diversification, hence allowing the investor to have a share of all of those companies, while funds can be purchased with very low expense ratios. The index has also returned about 10 percent annually, over time. This will also be one of the best options for the beginners to start investing as it has high rate of liquidity where investors would be able to sell or buy funds on any business days.

4. Nasdaq 100 Index Funds
This investment is also one of the great choices where the investor will have exposure to some of the biggest and best tech companies. To top it off, one doesn’t have to pick the winners, and nor do they have to analyze any specific companies.
Here, the fund is based on the Nasdaq’ 100 largest companies which include today’s business giants such as Amazon, Apple, and Microsoft. This model also provides an immediate diversification, hence securing investors from the failure of any single company. Similar to S&P index fund, the best Nasdaq funds charge a very low expense ratio.

5. Dividend Stock Funds
A company’s profits which can be paid to shareholders are called the dividends. The best part about this model is that the investors will not only get long-term profit, but will also be able to earn cash in a regular, short-term basis. However, selecting the perfect one will make the vital difference; hence one should make sure of investing in companies who have a robust history of dividend increases.