Posted By 
By Gary Bordeaux
Special to the Financial Independence Hub
If you are looking for a way to secure your financial future, learning how to invest your money can help accomplish that goal. There are a variety of investment vehicles that can be tailored to fit your needs, timeline, and risk tolerance.
Let’s take a look at some of the specific reasons how investing helps a person obtain financial independence (aka “Findependence”).
Make money both today and tomorrow
If you are interested in generating a steady income from your investment portfolio, you can buy dividend stocks or a REIT (Real Estate Investment Trust). You make money today by receiving a dividend payment every month or quarter. You make money in the future by holding the security as it appreciates in value. When it reaches what you feel is the height of its value, feel free to sell it and lock in a profit. It is also possible to hold stocks in a trust that can benefit children, grandchildren or other beneficiaries after you pass on.
Obtain returns greater than the Rate of Inflation
Thanks to inflation, a dollar that you hold in your hand today will be worth the equivalent of 98 cents a year from now. This is because the price of goods will increase by an average of 2 per cent per year. In some cases, inflation can reach 4 per cent or greater in a given 12-month period.
As a general rule, stocks will appreciate by about 7 per cent per year, and that amount is higher if a stock offers a dividend. What this means is that you are increasing your net worth above what it takes to keep up with cost-of-living increases. Over a period of years or decades, you could accrue tens or hundreds of thousands of dollars that can be used to enhance your lifestyle.
Improve your chances of owning a home
Let’s say that you are looking to buy your first house. You could decide to buy a single-family unit with a monthly mortgage of $1,000 that you are responsible for paying on your own. However, another option is to buy a duplex that you can both live in and derive income from. At the very least, having a tenant living in the other half of your home will decrease the monthly mortgage payment.
The money that you save can then be used to improve the home or make other investments. If you make improvements to a property that is used for rental purposes, it may be possible to write off the amount of those repairs on a state or federal tax return. Although a new owner would need to honor a tenant’s lease if you chose to sell the home, you are free to liquidate the property at any time.
Investments tend to receive better Tax Treatment
Capital gains tax rates tend to be lower than those imposed on wages or self-employment income. Depending on your tax bracket, you may pay nothing in capital gains taxes after selling a home, stock or other investment for a profit. However, you may still be required to pay state capital gains or ordinary income taxes on that profit.
Invest at your leisure
Since the market will move with or without your input, you can invest in stocks, bonds or other assets whenever and however it fits your needs. If you are disabled, investing in stock options or currencies can be a great way to make an income despite your limitations. The use of data visualization tools can make investment decisions easier for anyone who wants to gain exposure to a market.
Understanding how markets work can be a lucrative skill to have. It can provide financial independence for yourself as well as for future generations. As investing can be done in a passive manner, it can be appropriate for almost anyone regardless of their work schedule or their physical or mental limitations.
Gary Bordeaux is a real estate professional and company owner based in Portland, Maine. As a retired real estate agent, he spends his time and energy investing, and writing about what he has learned. His goal is to help entrepreneurs and small business owners achieve their full potential.
