What's a good investment these days?

Today, there’s lots of ways you can make money. Too many ways actually. Each investment opportunity has its own set of pros and cons with varying degrees of risk and reward. However, the biggest question most financial planners tend to ask is “What is your goal?”. Duh, “To make money!” But, what does this really mean?

The answer is based on time, leverage, and cost reduction. Do you want to have money now (residual income) or do you want money over a period of time (principal growth)? Or possibly a combination of both? Are you comfortable borrowing money to make money OR do you plan on using money you have already saved? Or a combination of both? Also, do you have ways of reducing your monthly debt expense (Mortgage, credit cards, student loans, car payments, etc) to “keep” the money you earn?

Here are some quick ideas for investment opportunities:

    Savings account
    Rental property - Residual income and/or additional equity
    Stock market - stocks, bonds, mutual funds, ETF funds, 401k, dividends
    Part owner of rental property
    Money Market
    CDs
    Business owner
    Venture capitalist
    Land or property
    Loan (micro or other)
    Your home
    Education to get a better job
    and I’m sure many many more

My best advice is to pick a few of these to create diversity. Additionally, you need to carefully learn about about each investment and understand the risks, fees, time requirements, potential return/losses, liquidity, maintenance or operational costs, etc BEFORE you jump in head first.

Liquidity and ease of access to your investment cash is one of the criteria I think is very important. Understanding how easy it is to get in or out of an investment should be a major consideration for how comfortable you are with the investment. For example, stocks are easy to buy and sell. Once you have an account you can trade shares of stock with the click of a button and have money wired to your checking account and stocks purchased/sold very quickly. Other investments, like a rental property, are more difficult and costly to buy and sell. Yet, each has a different outcome and possibly a greater return for the work involved.

Today, I feel most comfortable with a “layered” approach. Having some reasonable cash in the bank with basically no return (maybe 3 months of living expenses), a 6-12 month emergency fund in a money market with minimal return that hopefully matches inflation and is relatively easy to access, and an IRA/Roth/401k for long term aggressive growth.

Knowing how much money you have available for an investment is critical. You have a budget, right? And you review your budget on a regular basis (weekly/monthly)? This is a crucial part of knowing how realistic it is for you to achieve your goals. Knowing where EVERY dollar goes each month is the best way you can reduce/manage your expenses or put the extra dollars to work for you in an investment.

So, once you’ve sorted through all these investment types, you should be able to formulate a goal you want to achieve and create a plan forward that fits in your budget and lifestyle. Happy investing!

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