Investing requires a large field of knowledge. In order to lock in big profit gains year after year, you have to stay ahead of the curve and always on the lookout for the next breakaway opportunity. Research from sources like WealthRocket is a great way to boost your knowledge in cryptocurrencies, ETFs, and real estate holdings, on top of reading about companies listed on the stock market. In order to beat the market, you need to understand it. Conducting your own analysis of companies, indices, and commodities is essential to long term success, regardless of whether you are seeking the bread and butter approach or want to diversify and add in alternative investment opportunities to your overall investment profile.
Return on investment is the baseline.
Understanding what you stand to gain on any investment opportunity should be your first port of call. Running the numbers on your expected return on investment (ROI) as well as any loss you may incur as the result of a bad call, must be a top priority for anyone risking their capital. A simple calculation of buy versus sell price will suffice to start, however thinking about the time required to arrive at that sale is also important. A 5% growth over the course of a week is certainly more fruitful than one that takes a year to mature.
Times interest earned.
A TIE ratio, or times interest earned ratio is a calculation of a company’s intake over expenses. Many early investors don’t understand the value of this metric, asking ‘what is a times interest earned ratio?’ and often dismissing the answer as a tertiary data point.
The truth is, businesses typically run on a combination of short and long term debt that finances expansion upfront and is then paid back over time to lenders, investors, or the business itself. Times interest earned is therefore a representation of a company’s liquidity at any given time, suggesting the ability to pay back debt even if a hypothetical shortage of business leaves the company unable to operate and generate any income. TIE ratio figures into a company’s long term viability and demonstrates whether a company can take on additional debt, or has been swamped by their total interest and debts. Due diligence with any company should always include looking at the TIE Ratio.
Apply lessons of the stock market to alternative investment spaces for increased growth potential.
In order to take advantage of the best alternative investments available to you, it’s important to internalize these lessons that the market can teach and then apply them to a new set of investment vehicles. Identifying long term viability is crucial in stock picking, but it’s also a major factor in choosing alternative investment opportunities that make sense for wealth growth as well. A TIE ratio may not help when considering gold versus platinum or two similar real estate properties. But the ability of either asset class to continue increasing in value, based upon a standardized set of principles remains the same in any market.
Searching for highly fluid commodities like vintage wine, high dollar fine art, or real estate properties that can generate long term growth or even passive income (with rental properties) follows the logic of returns. You must work with the data available in order to identify fast movers that you can leverage to create a quick buck, and other investments that you can hold for the long term to underpin a decades-long history of success. Investments are all about building retirement wealth, so a mixture of fast growth and long term holdings that mature alongside your career is the best way to achieve this financial freedom that we all seek as we grow older.
Stick to your principles and always do your research in order to find viable companies and commodities that can withstand short term volatility and create lasting growth.