Practical Ways to Fund Your Investments

Investing is one of the most effective ways to build wealth. It allows you to put your money to work, earning passive income through dividends, compound interest, and outpacing inflation. However, as interest rates and cost of living continue to soar, people interested in getting into the stock market for the first time are wondering how to get their foot in the door with less capital to invest. If you don’t have a lot of capital to invest right away, the first step is to figure out practical ways to fund your investments.

1. Bank Loans 

Loans exist for a reason– to provide you with enough capital to make investments. Although it is not a good idea to approach loans with a gung-ho attitude, if you have a good financial strategy and solid investment plan, there is no reason why certain loans can’t be used to fund investment opportunities.

Margin loan 

This kind of loan is specifically designed for investing. Margin lending is a type of loan which allows you to increase your investment exposure in order to maximise returns, either through diversifying your stock portfolio or putting more money into existing holdings. Not only can it help you get your foot in the door, but it also has tax benefits. However, as with any loan, there are potential risks which include the very real possibility that your investments decrease in value, leaving you not only with decreased valuation in stocks, but a loan with interest. Margin loans can be very practical and useful, but you should always ensure you have the right investment strategy and financial position before you borrow.

Investment property loans 

As the name suggests, this kind of loan is used to invest in commercial property. This can include anything from land, to houses or apartments. As mentioned, borrowing gives you access to more money to ultimately invest, as well as nice tax benefits, however you are also at risk of bigger losses, capital risk, and investment income risk. Getting started in real estate without capital may feel like you are putting the cart before the horse, but the most surefire way to fund investments is by money you make off other stable revenue streams, and historically, with the exception of recession and disaster, the most stable revenue stream is real estate 

2. Sell or rent your assets 

In some cases you may be sitting on more capital than you realise. If you have assets like a car, home, or even just a room in the house, you might consider how much value you can derive from them and potentially use them to generate some rapid seed money. You could rent out the car with apps like car next door or rent out your spare room or entire house on Airbnb if you’re going for business or leisure. There are plenty of practical ways to find money amongst your own assets if you look closely. 

3. Refinancing your Home Loan

You may have heard of refinancing  but may not know what it entails. Refinancing your home loan essentially means paying out your existing loan with a new loan, which is usually done to take advantage of better rates, consolidate debt, reduce monthly repayments, or, in this circumstance, getting extra cash to invest. There are plenty of reasons to refinance your home loan, but you need to ensure that you understand the costs, rate, and loan terms, before deciding that refinancing is right for you. There are usually additional costs that come attached to refinancing, such as government fees, legal fees, and lender fees. If you want more information about how this process works, Joust explains how to refinance a home loan in simple, easy-to-follow steps. 

4. Creative passive income revenue streams 

As legendary investor Warren Buffet once said: “If you don’t find a way to make money while you sleep, you will work until you die”. Although Buffet was referring to investments, you can also generate passive income in order to fund your investments.  If you need extra cash flow, passive income generation can be a lifesaver and there are plenty of passive income ideas to choose from. You can create a course, write an ebook, create an app, or, if these seem too time-consuming or difficult, you can rent out a parking space or advertise on your car.

5. Join an investment club

If you are confident in your investment strategy but don't have enough capital to fund it, there is also the option of joining an investment club. Although this is slightly more unusual, it is still a practical way to pool resources and fund your investments. Not only that, but you are also able to learn about different types of securities, investing styles, and trading strategies, and work with a group of focused people towards the goal of earning more money from your mutual investments. Keep in mind that most investment clubs require an initial lump-sum payment, so do some research to make sure you can afford to get in and start investing as a team.

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