Calculating Earnings on Investments: Tips for New Investors

Every new investor is eager to understand the returns they are seeing. A full picture accounting of your portfolio is something that every investor needs. However, it can be tricky to really grasp the complete nature of your earnings, especially for those new to investing.

 

Investments in flux.

 

The first thing you need to understand as a new investor is that your assets collect unrealized profits during the time you hold them. Stocks, gold, and real estate all carry a hypothetical value that exists in a state of constant flux. A buyer out there is always willing to purchase your assets and at a price level determined by current market conditions, so this hypothetical value can be immediately made real at any time, but only when you choose to sell back to the marketplace. This means that a downturn in the market doesn’t exactly correlate to a reduction in your assets.

 

Once you sell a commodity the price you receive for it becomes a realized profit or loss. So a brief downturn that sees your assets lose five percent, is only a true loss of that magnitude if you choose to sell at the depressed price. In order to see positive performance over the long term, you must understand this difference between realized and unrealized profits on trades involving your stocks, tangible assets, and other financial products.

 

Hold assets for maximum long-term growth.

 

The best way to enjoy high yield returns and build your overall net worth is to hold investment assets for the long term that can underpin growth and give you flexibility in the short term. Seeking companies that boast a high times interest earned ratio is a great way to invest in stocks that are highly likely to perform at or above market expectations over the next year, or five, or 10. These stocks often pay out high-value dividends as well so building a rock-solid investment profile with this asset class as your platform is the best way to create lasting growth while seeing a constant stream of new capital directed back into your buying potential.

 

While you should rarely sell during short term downturns, calculating earnings when you do eventually sell assets is a fairly routine task. Calculating base earnings is as simple as subtracting the buy-in price from the price at which you sold your stocks or real estate property. However, the simple cash value is just one way to value the earning potential of your assets.

 

Leverage to create additional earnings value.

 

Many of the assets you will collect as an investor are worth more than their “street value.” Real estate is often leveraged to create favorable borrowing terms when seeking to add additional properties to your portfolio, meaning that a home is worth more in your holdings than its resell value. Some of the favorites in this class are precious metals, wine, artwork, and of course real estate. For more information, you can read up on Yieldstreet reviews for more on these additional asset classes well suited for a higher net income. Properties grow portfolios with incredible speed once you understand what to look for in a home and have built a robust strategy for flipping or renting acquired properties.

 

Research into the marketplace conditions that drive profit in real estate holdings in your local area is something that all investors should keep up with. You should be working toward a portfolio that includes a diverse set of assets, including real estate holdings once you can afford to include them.

 

Real estate is one of the most common vehicles that borrowers use for use as collateral, giving you increased access to additional lender money to buy even more assets that will bring profits to your bottom line.