How to get the most profit out of 100.000 Euro
This article was published on 26.05.2010
In April 22nd, I had presented to you my opinion about how to get the most profit out of 50.000 Euro. You can find that post here. Just 5 weeks later, you can check what I had proposed to you and knowing what happened, you can extract your own opinion.|
But many of you had asked me to present to you options for higher sums of money. This is why today we will talk about a sum of 100.000 Euro.
Deposits: The corner stone of every investment
No matter what you want to do with the rest of your money, a minimum of 20 – 30% should be kept at a bank deposit. For 100.000 Euro this means
about 20.000 – 30.000.
Why?
- It is safe.
- Whatever happens to the rest of your investments, you never lose all.
- Sums up to 50.000 Euro are guaranteed by the State, no matter which is your bank.
- Your income is exempted from the income tax for 2010 (at least until today).
- Some cash should always be available, in order to grab a fast opportunity.
Tips
If you are a more defensive investor, this sum can increase. But also this means that the overall outcome of your investment will be lower.
Try to negotiate in order to block your money for 3 months, receiving an interest rate close to the best possible. If you deposit your amount for 1 year, you may lose opportunities throughout the year, as the economy is still very volatile.
Ron pays better interest, but the trend for the following period is to depreciate against Euro and Dollar. (personal estimation).
Don't change bank just because someone else pays you 0,1% more. Build a relation with your banker, you never know where you might need it.
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Stock Market: Yes, if you are ready to lose as well
With Romanian stocks having crushed by 40% over the last month, things started to enter in the right order. It was not normal for an economy to be in a continuous decline and its Stock Market to party for 13 consecutive months. But this drop creates a more interesting environment for investors.
Why:
- You can increase the overall performance of your portfolio.
- On the long run, you will not lose for sure.
- Dividends are also an extra source of income.
Tips:
Investing in Stock Market means that you are ready to lose part of your capital. Also you are supposed to have a minimum knowledge of the field, avoiding unnecessary risks. If not, stay away.
I would choose strong shares, SIFs and other "blue chips" of the Romanian Market. There may be other shares which will over perform comparing to these, but these shares are also dangerous to crush as well, leaving you speechless.
Choose shares with high liquidity. Imagine yourself getting blocked in an investment where you simply can not liquidate it. How does it feel like?
Placing margins is always useful, especially for short term investors. An increase of 20%-30% and a depreciation of 10%-15% would be the ranges that would indicate an exit moment.
Placing the whole amount in one share should be avoided as well. (I would personally wait a bit more, to see the stocks returning closer to their 2009 low levels year before investing in this segment).
If you invest 10 – 15% of your capital in shares, it will be considered a defensive strategy. More than 30% of your capital would be definitely an aggressive (and risky) strategy.
Real Estate: Among the best options
For the ones who want to beneficiate both from safety and as well from the possibility of a significant increase of the value of investments, real estate properties continue to be a solution. The property prices dropped, in average, with 40% up to 70% compared to the peak from the beginning of 2008. More or less, the prices have reached their "rock bottom". Be careful, not the asked prices you see in the newspapers and sites, but the final ones after the negotiation (if the owner really wants to sell).
Apartments:
Choose properties built after 1985, ideally new.
Location and quality worth, are paid more but they pay back too.
Target an annual yield of 7 – 8% out of rents.
On the long run, you can expect a 5-6% yearly increase of your property's value.
Lands:
If you believe in fairytales, invest in lands without utilities. If not, I suggest to you to choose properties that either benefit of utilities or they are very close to them (few hundreds of meters).
- Try to identify clear signs of development. If you will be the pioneer investor in an area, you might become rich in 30 – 50 years, but you also might remain blocked for 30 – 50 years.
- Several good properties are 70 – 80% cheaper than their peaks during 2008.
- Ideally buy inside the city (or town, village) or close to it.
- Forget your land for the next 1,5 – 3 years, especially if it is out of the city. The market needs time to recover and 2010 will be lost for sure.
- A 7 – 10% annual return is quite realistic.
- (For more information about choosing a land, press here)
Strategies: Deposit and…
After you have deposited 20.000 – 30.000 Euro, you have an available amount of 70.000 – 80.000 Euro to invest. If you choose Real Estate, these are your options:
– Two studios.
– One studio and one land
– One apartment of two rooms and one land
– Two lands.
– One small land inside the city, for a small block.