Something on the rich side: How to make money on investments if you don’t want to follow all the news of the financial market.

Together with the management company “Pervaya” we tell you how to start investing money if NFTs are just letters for you, and Dow Jones sounds like the name of a rapper.

What are the types of investments?

There are many ways to make money with the money you already have, and new ones are constantly appearing. And if shares were invented back in the 16th century, then cryptocurrencies and venture funds have only been talked about in recent decades. Proven and reliable methods are called traditional, while recent and high-risk methods are called new.

In this article we will talk about traditional methods, because if there is something more or less predictable in a dynamic financial market, then this is it. These include the following.

• Investments in real estate. Apartments are still attracting investors. This is an investment in a real object. But the acquisition will not pay off quickly - the average yield is 4-6%, and the payback period is 14 years. Such investments have a high entry threshold - it would be nice to have several million rubles in your pocket.
• Investments in precious metals and stones. First of all, it's beautiful. But not only that: gold bars can be considered as a defensive asset - the metal tends to rise in price during periods of economic downturn. It is unlikely that you will be able to make quick money by buying gold, but it is quite possible to save your savings in the long term.
• Purchase of securities. No, we are not talking about snow-white A4 sheets for the printer, which have become scarce in 2022. These include stocks, bonds, bills, bank certificates and other documents. The investor himself chooses the degree of risk. For example, you can buy bonds of a reliable company that bring a small profit. And if you like adrenaline and have strong nerves, invest in shares of a small company. You can profit from dynamic growth, but there is also a risk of losing a large part of your investment.
• Futures and options. By buying them, you do not acquire the assets themselves (stocks, bonds, currency), but the opportunity to buy or sell them at a pre-agreed price. This option is suitable for experienced investors because asset prices can go negative and you can end up in debt instead of making a profit.
• Mutual investment funds (UIFs). A suitable option for those who do not want to constantly monitor which securities to buy and which to sell. Funds pool investors' money and invest in various assets - stocks, bonds, real estate. They are managed by a special financial organization - a management company (MC). There are different types of funds. A share (share) in open-end funds can be bought or sold at any time, in interval funds - in a specific period, for example, once a quarter. Closed-end funds are created for a period of 3 to 15 years and you can purchase a share in them at the time of formation or at pre-planned intervals. It is impossible to redeem the share ahead of time, only to resell it to another investor.

Only the Nigerian prince promises quick profit out of nothing in spam mail - but it’s not there. Therefore, it is better to rely on traditional investment tools - they will not lead to wealth overnight, but will provide an opportunity to preserve savings. If you are just starting to invest, choose payout mutual funds. They allow you to make money on the growth of securities and receive income from dividends and interest (coupons) on bonds directly to your bank account every quarter. For example, you can purchase a share in the mutual fund “Mixed Fund with Income Payment”. There is no need to buy securities yourself - management is handled by professionals with experience in the stock market.

Become an investor

What are the advantages of traditional instruments?

1. This is a more predictable option

The popularity of non-fungible tokens (NFTs) rises and falls just as quickly. And securities are a tool that has been proven over the years, and serious surprises are unlikely to ruin your financial plans. Of course, investing always involves risks. But behind stocks and bonds there are real companies, so you can evaluate how much they earn and whether there is potential for earnings growth in the future. When purchasing a share in a mutual fund, the management company will always provide a forecast of the average annual return under different scenarios.

In the case of NFTs, the situation is less predictable because it is difficult to explain their value. On the one hand, the buyer of a tokenized tweet or GIF with a cat receives the right to the file, on the other hand, nothing prevents other users from copying it, since this is not regulated in any way by law. The cryptocurrency market began to fall in March 2022 and lost $2 trillion in June alone. Of course, some traders can make money by buying and selling crypto at the right time of the day, but such tactics require practice and nerves of steel.

2. You don't need to be an expert

It can still help to understand the difference between a stock and a bond, but in general, you don't have to be a Wall Street wolf to earn dividends. It is enough to invest money in a mutual fund - it is managed by professionals, and you can start investing with small amounts.

Investors make profits in different ways. For example, you can buy one or more shares and, if their price rises, sell. Or you can choose a mutual fund with the payment of intermediate income - then you won’t have to sell the shares. The profit will be transferred to the bank account within a specified period, for example once every three months.

The securities market has transparent regulation and a well-built infrastructure. It is controlled by the Bank of Russia, so you can check the license of the management company in the register. Another plus is that you can buy and sell Russian securities and fund shares on any day. While quickly and profitably converting rare cryptocurrency can be difficult.

3. There are tax benefits

And this is always nice. For example, owners of mutual funds pay income tax (NDFL) when selling shares only in a few cases:

• If you invested in the fund before January 1, 2014.
• They owned the shares for less than three years and earned more than 3 million rubles from investments in a year. Moreover, tax is paid on income above this amount, and not on the entire amount.

Citizens who sell securities of the high-tech sector of the economy are exempt from personal income tax. You can check which documents are included in the list on the Moscow Exchange website.

And according to the new rules, purchases of diamonds and precious metals are not subject to VAT. In addition, in 2022–2023, personal income tax on the sale of gold bars will be abolished.

4. You can choose different investment terms

If your goal is to preserve your savings, invest for 5–10 years. For example, in stocks, precious metals and corporate bonds. And medium-term investments for a period of one year will allow you to earn money for a vacation or pleasant little things. You can consider federal loan bonds (OFZ) - these are securities issued by the Ministry of Finance of the Russian Federation. OFZs give the owner the right to a certain income depending on the term of the bond, the amount and payment procedure of which are determined upon issue. And on the day you return the papers, you will be refunded their face value.

Corporate bonds with a high credit rating - A are considered reliable. It indicates the ability of the company that issued the securities to fulfill financial obligations. In Russia, ratings can be assigned by four agencies. In addition to A, there are documents with a rating of B - average in reliability, C - close to bankruptcy, D - having experienced default.

If you want to immediately invest in different stocks or bonds, you can buy a share in a mutual fund. Some mutual funds offer investors to receive regular payments. With such income you can buy a better trip or a more expensive gadget. At the same time, you won’t have to take money from your main savings, which means you’ll be able to achieve larger goals.

Where to start investing

1. Decide on your goals

Think about what you want: to receive regular passive income, gradually increase capital, or maximize profits. The set of securities in which you invest will depend on this. If you are a beginner, start with the simplest tools.

Determine your starting capital. Never invest your last dollar, especially if you are planning to buy shares of young companies. Income from securities is not guaranteed, and therefore you need to invest free money that will not be needed in the near future.

It is better to give preference to Russian securities of well-known companies. It can be difficult to invest in the American or European market right now. Access to the markets of other countries is still very limited, and it will be difficult for a novice investor to independently analyze companies from China or India.

2. Distribute your investments

The wisdom of the saying about eggs in different baskets has not been canceled. Don't invest in stocks of one company or industry. As a rule, prices for such securities behave the same way: they rise and fall together. It is better to invest in different directions. For example, in order to receive income from the general growth of the market, you can buy a share in a fund that invests in shares of “blue chips” - large, reliable companies. And if you want to make money in the mining sector, choose a mutual fund that invests in securities of enterprises in this industry. In addition, there are “gold” funds - they allow you to receive income when prices for the precious metal rise and without having to worry about where to store coins or bars.

If you are new to the stock market, choose understandable instruments and proven intermediaries. Pervaya Management Company has been operating in Russia for 27 years and offers clients investment instruments based on their goals, risk profile and planning horizon. For example, you can invest in an Income Bond Fund or an Income Stock Fund. They work on a similar principle - they invest in securities of large Russian companies from different industries. And shareholders receive income into their bank account once a quarter. You can manage the funds received at your own discretion - invest again or spend. To become an investor, just submit an application online.

Buy a share in the fund

3. Periodically evaluate portfolio performance

It is better to invest small amounts of money, but regularly and for the long term. Even if at the start an increase in profitability of 3–5% per annum seems insignificant to you, in the future this can lead to impressive results. Review your portfolio from time to time and purchase additional assets. Such rebalancing is necessary even if you invest in mutual funds.

Investing more time and effort on your own will take more. The main thing is not to flinch at every price fluctuation. This is normal on the stock market. It makes sense to sell shares when major business risks arise—for example, the adoption of laws that significantly affect the company’s operation. It is also worth parting with securities if the company has been accumulating a debt load for years. There is a possibility that it will not be able to meet its financial obligations.

JSC Management Company "Pervaya" was registered by the Moscow Registration Chamber on 04/01/1996. License of the Federal Commission for the Securities Market of Russia to carry out activities related to the management of investment funds, mutual funds and non-state pension funds No. 21-000-1-00010 dated 09/12/1996. License of the Federal Commission for the Securities Market of Russia No. 045-06044-001000 dated June 7, 2002 to carry out securities management activities.