Good financial investments for the money conscious person is buying and holding stocks, 401k/IRA retirement, and owning real estate. To add to this, the best investments are the buying and holding ones in both stocks and real estate. As my dad told me once, buying a house is a good option when you plan to be somewhere for 5 years or more. I look at stock investing in the same way. I don’t buy unless I plan to keep my money in the stock for over 5 years.
Buying Stocks in Companies
Every time I put money into stocks I imagine myself literally tearing up the money as if I am throwing it away. This means, it is not to be taken out due to a personal emergency or in an attempt to time the market. You should do some basic research on the individual company that you are buying stock in. Then you are on your way.
If you want to learn about investing and stocks, I highly recommend the book “Buffett: The Making of an American Capitalist” by Roger Lowenstein. What I love about this particular book is that it is a biography of Warren Buffett before he became uber popular and everyone was writing about him. And, many investment books are about other authors trying to iterate on Buffett’s strategy to tell you how to buy stocks. Why in the world would you take second hand advice? That’s why I read biographies rather than how other people interpret the originators strategy. Don’t do that. Go straight to the source.
The benefit of this book on Buffett is that it really focuses more on his personality and habits in addition to the basics of his investing strategy, i.e. value investing. Buffett is quite consistently boring. He is not going for flash. He picks stocks where he can read their financial statement and ultimately, buy what he understands. The main things you should know is, is the company profitable? Do they have cash flow on hand…in case we hit a recession they will have cash to maintain the business. Companies that don’t have cash available are the ones that are waiting to go under. Thirdly, read about the owner and his business. For most companies it is not hard to find some information on CEO’s or founders to understand what they value in relation to running their business. If you understand the business and see how people benefit from it, then it is going to be a good investment. Finally, buy what you know. If you don’t understand how a product works and the value they bring to the market then it is probably best not to buy its stock. If you think of stock as part ownership, because that’s what it is, the steps I provided above make perfect sense before you invest.
Why don’t more financial experts talk about the problems with trying to ’time the market’? Because fear sells and so does intrigue. My investments have done really well over the long term. Do you know what makes me anxious? Watching financial shows to see how the market is doing on any given day. Why does it matter if you are investing for the long term? Markets go up and they go down but they have proven to continue growing if you can withstand the downturns. That’s why you mentally choose to throw the money away when you invest in stocks. This also goes for retirement plans where I also invest in stocks.
The majority of Americans do not need financial advisors. Most financial advisors are not helpful and in many cases they are simply trying to sell you what makes them the most money. Secondly, a good bit of financial advisors these days are not people who read about investments, they are pulled into multi-level marketing programs that have them focused on recruiting and following the process laid out for them. It is again about intrigue and salesmanship, not about real investing. Being a good investor, as I mentioned, is boring. Open your own Fidelity account or E-Trade account and do it yourself.
Also, variable policies of any kind and whole life insurance are gambling and for the majority of Americans should not be used as a borrowing mechanism or used for ‘leverage’. That’s what gets people in trouble. If people would just stick with boring I’m convinced there would be a lot more financially well off people.
Buying Real Estate
Buying real estate with the intention of owning is also boring. You are not trying to flip houses to make a quick buck. You are in the market for the long term. You are invested. But those who commit to homes for over 5 years reap the most rewards. I always think about my grandparents from World War II generation. They are not distracted by constantly renovating or updating everything. I went into my grandma’s house recently and literally nothing has changed since I was going there as a child. Of course, these are extreme situations. I don’t think you need to be that boring, but there is something about being content when it comes to investing in the long term. This applies whether we are discussing real estate or stocks.
Boring Investments Reap Long Term Benefits
I think it is perfectly fine if you try some different kinds of investments other than the ones I’ve mentioned. But just know that they are not necessarily an investment as much as they are trying to leverage something, or gamble, or time the market. The best investment is thinking long term, it is not trying to time the market for short term gain. And while creative investments or creative financing might be cool, they should be done with caution. 95% of Americans don’t need trickery, they need to be boring, by having the foundation set through investing in what they understand by finding the value. When in doubt, go with boring.