Finance Buddies, are you looking for another source of income but don’t have much time? As we enter adulthood, we have many responsibilities and have to divide our time between work, parents, or kids. Often, we don’t have the energy or time to look for another source of income. But what if I told you that you can earn income while staying chill by becoming a sleeping investor? Let’s find out more!
What is a Sleeping Investor?
A sleeping investor is someone who invests long-term in safe and low-risk financial instruments. The focus isn’t on maximizing short-term profits but on making the investment sustainable. This way, they can sleep soundly without constantly checking their portfolio. Trust me, this will save you a lot of time and stress!
So, how do you become a profitable sleeping investor? Let’s discuss.
How to Become a Sleeping Investor
1. Gather Capital
The first step you need to take is to gather capital for investment. You can do this by setting aside 10% of your income for investment. Once your investment generates returns, you can roll those profits back into your next investment.
2. Have Another Income Stream
The key to being a sleeping investor is being able to sleep comfortably without worrying about your portfolio’s performance. Obviously, if you rely solely on investment as your main source of income, you won’t be able to sleep soundly, right? Therefore, to be a relaxed sleeping investor, you need to have other income streams as a safety net in case your investment fails. In fact, most sleeping investors are those who don’t have much free time to monitor their investment performance.
3. Trust in Compounding
Did you know that investment is just a matter of time? Yep, this is known as the compounding concept. All sleeping investors believe in compounding and don’t seek quick profits. In short, this concept explains that the returns generated from an investment are not only based on the initial capital invested but also on the returns generated from that investment over time. It’s like a snowball that grows bigger over time.
For example, you invest $100 with an 8% annual return. In the first year, you’ll earn 8% x $100 = $8, so your total investment becomes $108. In the second year, you’ll earn 8% x $108 = $8.64. So, your total profit at the end of the second year is $16.64, and your total investment becomes $116.64.
At the end of the third year, you’ll earn 8% x $116.64 = $9.33. So, your total profit at the end of the third year is $25.97, and your total investment becomes $125.97. By letting your investment grow over a long period, you’ll see how significant the effect of compounding is on your investment. Remember, patience is key!
4. Choose Undervalued Stocks
One trick you can try is investing in undervalued stocks, which are assets that are cheaper than they should be. These stocks have higher profit potential in the future.
How do you know if a stock is undervalued? You can check for companies with a low Price to Earnings Ratio (PER) and Price to Book Value (PBV) below one. Why? Because if a company has a lower PER than its business sector, it means the stock is cheaper than others.
5. Choose the Right Types of Assets
Lastly, you need to choose assets that suit your preferences. Investment isn’t just about stocks; there are also other forms of investment such as gold, property, mutual funds, bonds, and fixed deposits.
Each type of investment has different risks and potentials. It’s important to understand the various types of assets. Additionally, you can diversify and not rely on just one type of investment. Remember, don’t put all your eggs in one basket!
So, Finance Buddies, those are the tips to become a sleeping investor who can still profit while resting. The key is to increase your knowledge about investment terms and types of investments. To become a knowledgeable investor, always check out the Invlinic blog! There will be plenty of information on financial planning, investments, trading, and the latest updates in the financial world.
