Four Stepping Stones To Profitably Investing Your Money
There are all kinds of investment vehicles around for you to make money with your money. The most common investment vehicles are stocks, stocks through a mutual fund, real estate, real estate investment trusts (REITs), bonds and investment securities. But really the choice of investment vehicle is the fourth stepping-stone towards profitable investment. Here are the four stepping-stones in the order in which they need to be taken
- Become debt-free. Dollar for dollar any investment returns will be much lower than the interest you pay out on unsecured debt such as credit cards and even on secured debt such as your mortgage. So it doesn’t make economic sense to put money into an investment vehicle at the same time as you are paying off debts. Put another way the most profitable investment vehicle you can have is to pay up your credit cards, live within your income and pay up your mortgage as soon as is humanly possible. Did you know that most investors never get to hear about the most profitable investment opportunities available in America today? The really profitable investment opportunities, like real estate securities with double digit earnings are only available to ‘accredited’ investors. The Securities Act defines accredited investors as high net worth people with at least $1 million or who have made at least $200,000 each year for the last two years and have “the expectation to make the same amount this year.” Are you an accredited investor? Many people may be surprised to realize that they are. The wealth things that most people forget about is the equity in their home and the value of their Individual Retirement Accounts and 401Ks.
- Decide whether to self-manage or put your money in ‘professional’ hands. When you are debt-free and have some money to invest are you going to manage your own portfolio or put it in the hands of a broker, banker or fund manager? All the information you need to self-manage is available on the Internet these days and you can avoid large amounts of commission and fees to make your investments all the more profitable.
- Pick the right moment in time to invest. Economic boom and bust is a fact of life for all investors. So the best time to invest is at the bottom of the cycle and on the up-slope as at this present time in autumn 2009. Set your profit targets and stick to them. Do not hold on to stocks for instance in the false belief that they will grow in value forever.
- Choose the best tactical investment vehicles: Investment vehicles fall into two broad categories. Those based on ‘real’ assets such as real estate (there is a clue in the name) or REITs and those based on money and less real assets such as mutual funds, bonds, futures or financial derivatives. Investment securities are any deal that takes your money and uses it to make more money. Securities can be any note or evidence of indebtedness and certificate of interest or participation in any profit-sharing agreement.