Long Term Growth Investments
In this posting we discuss an overview of growth investments and then later on we take them one at a time to look at them in detail.
- Growth Investments- buying and taking ownership of something whose value will grow over time. You gain profit and capital at disposal or through regular payments due to your ownership. The underlying principle is to buy low and sell high. By buying low we are talking of buying at a discount rather than buying a cheap asset with no prospects of growth. There are moments when an asset is discounted due to a variety of reasons – this is the time to buy the asset.
- Examples of growth investments are:
- Real Estate.- This involves buying, managing and selling property consisting of land or buildings. The buildings maybe houses, office blocks, and malls. It is critical particularly in Zimbabwe if one is considering rental properties as an investment to focus on commercial property because this gives better returns with less regulations. Residential rental properties have low returns and are heavily regulated. The rental laws in Zimbabwe are tilted in favour of the tenant and not in favour of the investor. Secondly most tenants in Zimbabwe fail to maintain properties and so the long term value of the property is affected by poor maintenance. If one has significant investment funds then office blocks and malls would offer higher returns. As mortgage financing becomes available real estate investments will provide even higher returns with lower upfront funds invested. Currently most properties are almost 100% funded by investor but this will change as the economy improves.
- Stock Exchange – this involves buying and selling shares in listed companies on the Zimbabwe Stock Exchange or any other exchange world wide. Currently the ZSE is underperforming which means it’s the best time for someone to pick up cheaply some valuable assets. The important thing about these is that the more shares you own the better in terms of return through dividends.
- Building and buying businesses – the cheapest way to invest is to start your own business. Significant wealth has been created by starting businesses. Its not easy but it has been done. A recent local newspaper carried a story last week about how Strive Masiiwa’s almost 80 million Econet shares translate to a significant wealth proposition considering the current Econet share value of about $5. His dividend alone was expected to be about USD7 million. Many entrepreneurs have created significant wealth through starting and running businesses. Others have invested into buying businesses. However buying businesses requires an ability to strengthen and consolidate the business for good returns. Starting business requires an investment of money and sweat.
- Intellectual Property Utilisation –This involves either own or others’ Intellectual Property to create money. This may involve writing books and then get passive income once they are published as sales continue. This may imply composing songs and letting others sing your copyrighted songs and pay you royalty. If you are an inventor is you patented your invention then you can generate wealth by selling the patent to people who will exploit the patent for commercial purposes. Intellectual property can be used for example when one buys an existing franchise as a business system.
- Tithing and Giving – As a Christian giving to God or contributing to society is a way of creating wealth as well. The Bible says that one should lay their treasure in the Bank of heaven where there is no moth or inflation. The Law of seed time and harvest time means that a person should intentionally give tithes and offerings as a wealth creation mechanism.
Now that we have given the overview, the next postings will include a detailed analysis of each investment option and give guidelines on how to do it. You are on your way to wealth creation. Keep the faith.