Calculated risk-taking is essential to creating wealth. The majority of the richest people in the world are entrepreneurs. But there are ways even average wage earners can build equity over time and secure their financial futures.
Here are a few:
Stocks
Stocks are the most convenient way to gain exposure to the corporate world. Instead of launching your own business from the ground up, you can buy a piece of a business that has been successful on a global scale for decades.
Some stocks can deliver jaw-dropping growth. For instance, chipmaker Nvidia (NASDAQ:NVDA) has delivered roughly 13,000% in stock-price appreciation over the past 10 years. That’s a decidedly better outcome than what you can expect from most startups and small businesses.
You don’t need to pick winners either. Instead, you can buy a fund that tracks the entire stock market to lower your risk. One example is the Vanguard S&P 500 ETF (NYSE:VOO), which has delivered 11.1% in average annual returns over the last decade.
Real estate
Real estate is another entrepreneurial venture. In fact, rental homes are a major part of the country’s economy, contributing $2.4 trillion to the gross domestic product every year. Fortunately, the barriers to entry for this sector are relatively low.
Mom-and-pop landlords account for the majority of small rental properties owned by individuals, according to the National Association of Realtors. Federal Housing Administration (FHA) loans have a minimum required down payment of 3.5%. Meanwhile, average annual gross rental yield on three-bedroom properties was projected to be 7.5%, per an ATTOM report.
Alternatively, you could invest in a real estate investment trust (REIT) for passive income. For example, Realty Income Corp. (NYSE:O), owns a portfolio of commercial real estate and offers an attractive 6% dividend yield.
Side hustles
Side hustles are getting increasingly popular. In a 2022 LendingTree survey, 44% of Americans said they have one — up 13% from 2020. They made $473 a month, on average, this way, which was almost $5,700 a year.
Through the power of the internet, it’s easier than ever to launch such a venture and supplement your regular income. Freelance writing, consulting, babysitting or online ecommerce are some examples of easy-to-start side hustles.
A successful side hustle can even unlock a massive windfall. According to a CNBC report, two friends invested less than $200 to start their tech-enabled side hustle and recently sold it for over $150,000. Stories like these are increasingly common as the digital economy delivers more opportunities than ever before.
Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
