Once you know what to do with the money from an inheritance (and you also know the steps to follow) the procedures, and necessary paperwork -especially the impact of the inheritance tax – you should be well on the way of knowing how to invest this money if you decide to do so.
It is an excellent option so that inflation does not eat up year after year the value of that inheritance received.
You should also know how to invest the money from an inheritance to plan your retirement or your current economic situation—knowing if you will want to invest in the short or long term, in which sector.
For this, it is best to let yourself be guided by a specialist who can also offer you a higher return rate than other options such as banks.
In this article, we will be showing you how to invest your small inheritance in long term platforms that will keep bringing in dividends.
It is advisable that you invest in security and confidence with a fixed returns and other safe investment methods that help you make the inheritance profitable.
Your first decision is whether to invest everything at once or in parts.
The most advisable thing is to diversify, dedicating a small number of resources to each investment, so that you will not be ruined if one fails.
Of course, be clear that a critical factor that will mark your investment’s profitability is when you buy and the moment you sell, this is called the market timing, where you want to buy cheap and get profitability by selling above.
To garner the best possible result, it is advisable to follow a safe investment method, such as the passive management method called Dollar-Cost Averaging, which is used when you are unsure when or how to invest your capital.
Periodic purchases of a fixed amount are made for a specific time so that the risk is diversified; this method is considered one of the safest.
There are also others such as Value Averaging, where the number of contributions is not fixed and varies depending on how these investments evolve.
It looks like the first, but its difference is mainly dependent on how the market is doing and how closes or far it is from the target set.
In other words, it is more subjective, and the human decision factor becomes much more critical, so this method is reserved more for professional specialists.
Where to invest the money from an inheritance?
It’s essential to note that diversifying your investments is always essential.
It would be best if you did not trust everything in the same market, an exciting option is investment funds with different types of fixed and variable income assets.
Also, they should preferably be managed by a professional, having the advantage of less risk and greater diversification of your contribution without the obligation to be aware of it.
A tip to know where to invest the money of inheritance is to trust the robo-advisors, that if what you do not have is time, since they automate the task.
You also have other options, such as online crowdfunding or crowd-lending platforms.
You can also invest in pension funds, since it has a low risk, seeking to ensure your future life, yes, at ridiculous returns.
Although, as earlier said, you can invest that money better to generate passive income for yourself in the long run.
For this, some options are: investing in a company that distributes dividends annually, being a money lender, or invest in the purchase of real estate and renting them later; otherwise, you can invest in other fields such as:
Buy, sale, or maintenance of your shares
Companies create these to be able to finance themselves; the people who acquire these shares have rights like receiving dividends when the company makes a profit.
It is generally done to buy them at a price and sell them later for a higher price.
It is a short-term method because it is done quickly and can be seen as a return in the medium-term not as much as in the short term, but not a long time either unless you remain a shareholder receiving dividends only.
On the contrary, it is high risk; the market is very volatile. A clear example is the coronavirus that has destabilized much of the world economy.
These are those related to the government’s debt or other companies, where what they ask is to finance themselves.
The lender receives periodic payments with interest (as if it were a bank, that is, you). It is low profitability, although that yes, with shallow risk.
They are usually small loans given to a group with few resources and have many obstacles to obtain a credit or loan.
If you want to play it safe, it is a correct option to know what to invest the money of inheritance because you know how much, how, and what you will receive apart from the deadline. The bank also carries out management.
How does it work?
The financial institution offers you an estimated return in exchange for keeping an estimated amount of money in the same bank account.
You charge interest when the term of the contract expires, if you withdraw the money or part of it earlier, you will pay the penalty.
Finally, you can invest in real estate; in a new or existing business by buying it if it is already operating in exchange for a percentage (shares) and then selling it for a higher amount.