Let’s Talk Investing

by B. Rich on July 11, 2012 · 0 comments

in Finance

Financially speaking, investing is the act of putting money to use in something offering potential profitable returns, as interest, income or appreciation in value.  Key word here is profitable.  When you hear the word invest what immediately comes to mind?  I’m willing to bet that most people instantly think of the stock market, even if they don’t quite understand what it is or how it works.  Let me tell you, there are many more investing opportunities, you are not limited to the stock market.  Unless you are without income or currently earning income insufficient for your needs, there is no reason why you can’t invest and put your money to work for you.  See if you can identify an opportunity from the following list:

1.  Payoff Debt - boring, right?  Welp, be assured that if you are carrying consumer debt and more specifically credit card debt, you are probably paying a pretty nice interest rate.  Someone with an average interest rate of 18% on their credit cards will gain an immediate 18% return by paying that card off!  How, well because you’re saving yourself the 18% you would otherwise have to pay.  May not be traditional and it shonuff ain’t sexy, but it works.

2.  Invest In You - For the love of sanity and all that is good sense, I cannot understand why so many people did little to invest in themselves during their 99 week stint on unemployment.  Like Newt said during his chase for the Republican nominee, 99 weeks is an associates degree.  #iAgree.  Aside from those who unfortunately are experiencing lengthy unemployment periods, investing in your education can produce profitable returns.  There are so many options, you can get a certification, a license, a degree, or just increase your knowledge in a particular area.  The word of caution here is to make sure that as a result of this education, your income potential will be greater than what it cost you to attain it.  Fancy, no, but it works.

3.  Become A Lender – Consider lending to those whom you have determined are trustworthy to pay it back.  Be sure to spell out the terms in a legal document like a promissory note, this will give you some protection and enable you to pursue legal actions should the borrower fail to fulfill their obligation.  If the idea of being a lender sounds interesting to you but you don’t want to muddy the waters by lending money to people you know personally, there are peer-to-peer lending options available such as Prosper.com and Lending Club.  The concept of peer-to-peer lending is to match people who want to invest with people who want to borrow.  I don’t know, I like the idea of being a lender and not a borrower.  Getting sexier, and it still works.

4.  Start A Business – Hands all the way down, I am THE biggest small business and entrepreneurship advocate around.  Unless you’re starting a business with minimal financial and time commitment, I would highly suggest that you make sure you are ready to become a business owner.  Entrepreneurship is NOT for the faint at heart, so do what you have to do.  Consult a mentor, find a business coach, take necessary classes, research, whatever it is you need to do, do it.  I’ve seen too many people lose their money unnecessarily, all because they didn’t take the time to do a little due diligence and/or put people in place that could help them be successful, such as an accountant, attorney, etc.

5.  Invest In Other Businesses – If starting, managing and running a business of your own is not for you, partner with someone who has that zeal and provide some or all of the financial backing.  I gotta admit, this one is near and dear to my heart.  I’m not currently playing in this investing zone but boy do I plan to jump in one day soon.  The big kahuna terms are venture capitalist or angel investor, but unless you have big dollars, I’m talking about the same concept, just on a smaller scale.  These are people who invest in other people’s ideas by providing start-up or operating cash to get the business going and in return they get to share in the profits (or losses … all business don’t make money … unfortunately) of the business as outlined in the agreement.

6.  Be A Landlord – I’m gonna take for granted that this investment option is self explanatory.  You buy a piece of real property such as a home or office building and you rent it out to tenants.

7.  Buy Paper Assets – This is probably the most traditional and well known way to invest.  When you invest in paper assets you are generally investing in stocks and bonds of companies and government entities.  Unless you are an active investor, you probably have no idea what your investments are because for the most part investing takes place via a retirement plan offered by your employer.  At some point you signed up for it, put a percentage down, selected a few options (or not) and the money is taken out of your paycheck each pay period and you know none the more other than you have a 401K, 403B, TSP, 457, IRA, etc.  While work place retirement plans are most common, they are not the only way to invest in the stock market.  Financial firms used to require a pretty nice sum of money for investors to open individual accounts, but I’ve seen the requirement go as low as $25, pretty much opening up the stock market to who-so-ever-will.

Hopefully this list has shed some light on various investment options.  I would be remiss if I didn’t tell you that no investment, other than debt payoff, is guaranteed to yield the results you desire.  You can, and people have, lost money investing.  I live by 2 golden rules when it comes to investing, (1) I do not invest with money that I can’t afford to lose.  In other words, should my investment blow up and I lose 100% of what I put in, I can still live and keep on going.  (2) in the words of the great investor himself, Peter Lynch, “never invest in any idea you can’t illustrate with a crayon.”  If it’s sophisticated or complex to you, stay far, far away or get madoff’ed.  #ThatIsAll.

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