What to do with 100$? Or where to invest them correctly

About how to manage personal free funds efficiently and profitably, while receiving passive income, experts of Freedom Finance Ukraine tell on the example of investing $ 100.

According to a study by the OECD Financial Literacy Index, in 2019 Ukraine ranks last among 30 countries in terms of the population’s knowledge of how to increase and maintain capital. Moreover, in leading countries like France or Canada, even a housewife has a personal savings account or a broker for investing “free” assets.

About how to manage personal free funds efficiently and profitably, while receiving passive income, experts of Freedom Finance Ukraine tell on the example of investing $ 100.

Given the specifics of the activities of our financial experts, we will acquaint readers with the methods that actually work in our practice and which maximize profit.
Stocks, corporate bonds, IPO
According to analysts, in 2018, the Ukrainian stock market showed an increase of more than 80%. The indicator of such large-scale growth has been holding for the second year, which, according to experts from Bloomberg, is caused by the significant economic development of the country.

Of course, an amount of $ 100 will not provide such wide opportunities for passive earnings in the stock market, so that the result becomes significant for the wallet. But overall, stock trading has high prospects.
For example, the shares of Beyond Meat, which were put up for sale at an initial public offering (IPO), cost $ 25, and after 2 months the cost of securities increased at an incredible rate – by almost 600%. If an investor had bought 4 shares of Beyond Meat in the amount of $ 100, already today the profit on such minimum assets would have been $ 600.

But the key feature of stock market trading is risk. According to Freedom Finance, almost half of the stocks traded in the stock market will bring losses to the investor, not profit. To avoid financial losses, you should correctly compile your investment portfolio. Assets must be distributed in such a way that, if some of the securities turn out to be unprofitable, other stocks still bring profit and cover losses.
There are three key instruments for passive earnings in the stock market: dividend shares, bonds and initial public offering (IPO) shares. Separately, it is worth mentioning each.

Dividend shares are securities that are of interest to investors at the expense of income. In fact, each holder, depending on the type of shares (ordinary, preferred, with a fixed percentage, registered), can count on a part of the company’s profit, depending on the number of shares (their share in the total number of securities of the company).

Most often, to receive dividends, they invest in shares of “blue chips” – the most stable, popular, old-timers with high capitalization of assets. The average dividend profit per share of such companies is 10-17%. Those. in the amount of $ 100 per year, you can make an average of $ 13.5 before taxes and fees.

An IPO is an initial public offering of companies that are transitioning from private to public status. Those. anyone can become an investor in such a public company. The advantage of an IPO is that the stock has not yet been traded on the market, so the price increase can be staggering. So, according to Freedom Finance Ukraine, in the first half of 2019, 18 of the 76 companies that traded on IPOs brought investors more than 100% profit. By the way, 6 out of 17 companies, in the initial public offering of which Freedom Finance clients took part, turned out to be just such highly profitable.

But even if you distribute capital in equal parts between the shares of all companies that went on IPO (including unprofitable ones), the average income level will be 29-30%. In the amount of $ 100, such an income would be $ 30.

Corporate bonds are securities that allow companies to temporarily raise investor funds in debt at a fixed percentage of coupon income with full repayment of the amount after a certain time. You can also invest in them, and quite a lot of Ukrainian companies issue bonds. In Ukraine, government bonds of domestic loans are the most popular, but anyone who wants through a broker can receive income from private companies. The profit rate for such securities varies depending on the company, its financial performance, market capitalization.

But the investor strategy also affects the profitability of trading in the stock market. For example, you can only invest in assets with a large predicted percentage of income – this is aggressive (high-risk strategy). And you can only invest in stable companies that regularly pay dividends and grow steadily for years – this is a conservative strategy. Or, the investor can equalize the risk conditions, having received both highly profitable assets and stable securities in the investment package – this is a balanced strategy. You can combine both the types of securities in the portfolio and their riskiness. but it is important to understand that only a personal financial expert of a brokerage company will help to correctly develop a strategy based on the amount of investment.

In order to start trading in securities on the stock market, you need to sign an agreement with an intermediary, open an account in securities, deposit funds. The average income that is voiced on the market of brokerage companies in Ukraine is 22-29% per annum with an average strategy. The average percentage is 25%. In a year, in the amount of $ 100 you can get 624.75 UAH. Taxes 18% + 1.5% military duty. Net of taxes, net profit will be 502.92 UAH.
Domestic government loan bonds
According to statistics, in 2018, our fellow citizens bought OVDPs in the amount of about 6 billion hryvnias. The par value of the bond is 1000 UAH., The total volume of securities sold is 600 thousand.

Such a demand is justified by a number of advantages of bonds: guarantee for the payment of income on securities by the state, no income tax (18%), high coupon rate (15% for national currency, and 5% for US dollar), which is fixed for 4 -6 years, the absence of restrictions on the minimum capital of entry, the absence of additional commissions and fees for the purchase or early sale.

For example, through the company Freedom Finance Ukraine, state securities of the paper can be purchased in the amount of 1150 UAH.
So, for $ 100, you can get 367.5 UAH for 1 year. before deduction of a military duty of 1.5%, or 361.99 UAH. net profit (average rate of return – 15%). Of course, the amount of $ 100 will not give such a significant profit, but with investments with a few zeros more and the result will be more tangible for your bank account and standard of living.

To do this, you will need to conclude an agreement with a broker or investment company, open an account in securities (for example, such an account is opened automatically with Freedom Finance Ukraine for free) and submit an application for the purchase of government bonds. It is worth noting that by the end of the calendar year, the Ministry of Finance usually increases the percentage of coupon income compared to the NBU discount rate, which creates additional opportunities for holders (for example, it is profitable to sell on time).

Deposits are becoming obsolete
According to the same Financial Literacy Index, only 12% of Ukrainians store money in deposit accounts with a bank. Distrust in the banking system and two crises over the past 15 years have yielded results. But opening a deposit account as a way to preserve savings cannot be ignored.

So, if we consider foreign currency deposits, for today, according to the Ministry of Finance, only one bank allows a deposit of $ 100 – Bank SICH.

According to the terms of the bank, you can place $ 100 for a minimum of 183 days without the possibility of replenishment and at a rate of 5% (4.5% for up to 1 year).

A year later, profit for this amount will be $ 5, and after paying income tax (18%) and military duty (1.5%), $ 4. At the official rate of the NBU at the time of calculation (September 13), 24.83 UAH. for 1 dollar., it will be 99.94 UAH.

Deposits in foreign currency are more profitable, but since the calculation amount is minimal, we do not have more deposit options in foreign currency. But we can invest in national currency.

The most interesting rate at the time of calculation is offered by Ukreximbank – 15.8%. The currency exchange rate in the bank is 24.50 UAH., I.e. investment amount – 2450 UAH.

Profit in a year – 387.1 UAH. before income tax and military duty (1.5%), after payment – 311.62 UAH. Please note that such a rate of return is possible in an ideal situation, when the rate does not change during the deposit term. But it is important to remember that the bank always indicates in the contract that it reserves the right to unilaterally change the conditions of deposits.

But if deposits are practically unprofitable, where to invest free capital? Securities – a modern alternative that has successfully established itself.
What is more profitable and what is more reliable?
Of course, the amount of $ 100 is only a conditional for assessing the real prospects for investing your capital. But even such a small budget can be turned into real capital, if you correctly manage the amount.

So, trading stocks through a broker shows the greatest interest – from 6% to 700% (and this is not the limit). It is only important to choose the right partner (or rather, an intermediary) in order to correctly distribute the risks and weigh all the possibilities.

Investing in bonds also shows a good result, but today private individuals still have little trust in the state enough to invest their money in (and in vain).

Banks are a common tool for “saving” funds. But apart from a personal account and profit, which smooths out, perhaps, inflation, an ordinary citizen will not be able to get a decent reward for the fact that his money brought millions of income to bankers. So why give your money to someone to earn money if you can receive, on average, 30% per annum personally?

Ephemeral $ 100 – a small amount, and for some – household. But if we showed by the example of $ 100 how much interest can be earned per year, imagine what income can be obtained if we add a few more zeros to this notional capital?