What's the best way to invest to get a good return on profit within three to five years?

Answer 1

I know there is no concensus on a "best way", but here are a few ideas on a good idea which will screen out a pile of future embarrassment.

First, does the company make money, and if not is there reason to believe that it will very soon?

Second, especially in times of uncertainty, how heavy or light is the burden of debt? While debt can increase the asset base, the funds you have to work with, and expand the capacity to function, a high debt load is a burden that keeps some companies from being nimble.

Third, is what they make or what they do still in demand and likely to be so for a while?

If your potential investment passes all three points, whatever it is won't be anything to be ashamed of in the future. Especially in market downturns, such companies fall last or not as fast.

Answer 2

This is a vague question that's asked by many nascent investors, and tends to elicit answers that run a useless gamut of suggestions, recommendations and hot tips. Before you ask what vehicles might give you a "good return", create an investment plan for yourself:

1. Define your goal. People in general work well with specific rather than undefined goals, so pick a number you want to reach in 5 years. You can calculate it any way you like, and don't be afraid to think big. It's always easier to scale back a number than ramp it up.

2. Identify your risk personality. It's important to know how much risk you can handle. Some investments allow leverage as high as 12:1, and that greatly increases the risk of wiping out your investment capital, even as the prospective gains have you rubbing your hands in anticipation. Ask yourself: Can you handle the potential of turning $1 into $3 or $4, knowing you could lose that $1 and more? If you can't, then you know that risky investments, and the windfalls they seek, aren't for you.

3. Do your homework. What kinds of vehicles are there? How much do you know about them? Do they fit your risk profile? Stocks, bonds, futures, real estate, business venture investments, CD's, mutual funds, IRA's, annuities ... what are they? What ROI have they traditionally netted over the years? Over what period of time? Have they been worth the risk?

4. Create a plan. Put together a series of objectives that move you closer and closer to your final number. Make sure your benchmarks give your investments the time to show their potential, but not so much that they incur unnecessary losses. These benchmarks will vary from investment to investment, so be flexible about opportunities, and strict about stop-loss rules.

5. Worry about being profitable, not about being right. In the end, it never matters whether you were right about the market, only if you made money in the market. These two aren't always the same thing. As an investor, you're a student of the market, and the lesson is as much about how you keep your profits as how you generate them.

Good luck! If you have any questions, feel free to e-mail me.

Answer 3

It is hard to say... how much money you got to invest? If you have enough buy a townhouse in a developing area of your city positioned in an easy commute location and rent it out... I live in Northern VA, so the average townhouse here goes for about 400K. Lenders usually want 20% down if you are doing this for rental purposes but you may be able to get away with paying a smaller down payment. So your investment amount is 80K plus closing costs. Rent it out. Make sure every year you claim depreciation of appliances, write off the mortgage payments and taxes and any other expenses related to renting this place out. Let's assume a modest 5% appreciation a year... but that appreciation is not on the 80K you put in... it is on the 400K you bought the house at. With your money leveraged, you will end up with 110,512.60 in equity growth. Now lets add the money you get from your tax incentives which would be around 10K/yr, so you are at about 160.5K growth. Now lets subtract your closing closts and rent/mortage difference (assuming your mortgage is higher then the rent you are getting). That's about 12K plus 24K... leaving you with 124K. The original 80K you put in you will get back when you sell the place at the end of the 5 years. When you sell, you do get hit for another 3% sales fee... so you are left with about 107K. The average rate of return therefore on your investment is 17.9%. If home rates go up more then 5% per year, you are looking at an ever higher rate of return. There is work involved with doing this... so it is not as easy as say investing in a mutual fund like "MCHFX" and hoping it will simply continue to grow at last years growth rates, but the risk is low and the return is nice.

Answer 4

The average return in the stock market over the past 50 years has been 12 - 14%. Any investment returning more than that is a "good investment".

Answer 5

CDs (Certificate of Deposits) are good ways to invest your money, especially if you want to preserve your investment and still make a profit.
ING has great rates for their CDs.

Answer 6

How much risk can you take?