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What are the Best Wealth Building Strategies?

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  • Written By: Elva K.
  • Edited By: Heather Bailey
  • Last Modified Date: 15 September 2018
  • Copyright Protected:
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    Conjecture Corporation
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What the best wealth building strategies are depends on various factors. For instance, much depends on how much money the investor has at the start. Also, much depends on the investor's risk tolerance and time table.

If an investor has a sizable amount of money at the start, he or she is in a position to make more money faster than someone starting with a smaller amount. For example, if an investor puts a large sum of money in the stock market, there could be potentially quick and significant gains depending on how fast the stock's value appreciates. Luck also plays a role in stock wealth building strategies in the sense that if an investor's timing is good or if there is a sudden news announcement which impacts stock, that could drive the stock price up and the investor could potentially double his or her money within a comparatively short time period.

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Risk tolerance is a factor in wealth building strategies, too. What might be the best wealth building strategy for an investor who has low risk tolerance would not necessarily be the best wealth building strategy for an investor who has higher risk tolerance. If an investor wanted little risk and did not know what to do, he or she could simply put money into an interest-bearing savings account at a bank. The rate of interest would be very low, however, it is a choice available, particularly if an investor had a large lump sum and was able to put the money into an economically solid bank that was not in danger of collapse.

By contrast, stock investments can be risky. For instance, if the company goes out of business, the stock becomes worthless and the investor loses money. An investor could do shorting of stock, however, shorting has its risks, too.

Bonds also vary in their risk. Municipal bonds are comparatively safe, but then there are corporate bonds, international bonds, and other kinds of bonds which come with varied ratings. They may or may not be safe depending on their bond rating, so bonds may or may not be the best wealth building strategy.

Investing in other types of investments such as forex, options, or futures are also areas which may or may not be the best wealth building strategy. If an investor has plenty of investment money and has expertise in forex, options, or futures, he or she could make significant gains, Under those circumstances, those would be good wealth building strategies; however, losses could occur as well. For example, options have an expiration date, which means an investor cannot just hang onto them in the same way they can choose to hang onto stock. If the underlying stock performs poorly, especially near the expiration date, the options could end up being worthless, in which case the investor would lose money.

Another thing to consider is the fact that, in terms of implementing wealth building strategies, time is something that cannot be controlled. For instance, if an investor is interested in T-bills, he or she can be more certain about time because T-bills have a specific time period, making them safer. Granted, as wealth building strategies, stocks are not necessarily predictable when one considers the issue of time because the stock may go up very quickly or slowly or may decrease in price over time. It all depends on the company, the expertise of those running the company, consumer demand, and other factors the investor cannot control. Also, if the nation or the world is in an economic downturn, that can have an impact on wealth building, too.

There are other kinds of wealth building strategies outside of the stock market. For instance, an investor could purchase land or property. Which investments would be the best wealth building strategies depends on the individual investor's unique circumstances.

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