Five Truths To Consider Before Investing
Whenever you invest, it does involve taking some chances, whether small or large. The large the single investment the larger the risk. I say ‘single investment’ because you can, of course, limit your risk through diversification, but no investment is without some level of risk, no matter how small.
Over the years of either working within the financial industry or coaching individuals and couples on finance, there have been a number of truths that have continuously cropped up over time, that I have either found myself warning investors about, or I have seen occur, because investors have not heeded the warnings, so I want to share them with you now, so that you don’t make the same mistakes others before yo, have made.
These truths are extremely obvious, but you will be surprised how all too often they impact on a persons or couples lives, probably because they are so obvious, people tend to not take them seriously. I hope you do, regardless of how obvious they may seem.
Truth #1 – It is easier to lose money than it is to make it.
Of course it is, you say, but as I’ve mentioned already, so many people ignore this truth and wonder why they are worse off after investing than they were when they started. It is never a good idea to put all the money you have set aside for investing, into one investment because that simply turns investing into gambling as I mentioned is recent post, nor should you allow yourself to be pressured into investing more than your want. If you are looking for a fast return, the chances of losing your money increase. Understand what your money personality type is first before looking to diversify your investments so as to limit your losses and increase the possibility of a healthy ROI.
Truth #2 – The lack of money is the number one cause of relationship breakups.
If money is scarce or you are on a tight budget, it can be tempting to invest in helping increase your financial status. It doesn’t matter whether the investment type is in stocks, bonds or a second business, or becoming self-employed if you get it wrong the strain on any relationship that you are in can be catastrophic. I have witnessed first-hand marriages destroyed and families being torn apart because of a lack of money, primarily because of bad investment choices.
Men/Husbands if you haven’t realized this already you need to realize it fast; no matter how independent your woman may be, she will always want to know that her man can take care of her financially and if you have children together, that you will always provide for them too. If you don’t have spare cash to invest, don’t risk investing what you do have, for the sake of a few extra bucks every month. Look to invest in yourself first, maybe take an evening class to add extra skills so you can apply for a better job, maybe look at what expenses you can cut back on first before adding to them.
It is important to understand that financial investing is not the best way to improve your financial status if your status is currently a poor one. It is better to have a poor financial status temporarily that you can improve, together over time, than a poor or even broken relationship because of rash investment decisions.
Truth #3 Be a good investor by securing a home.
Property investment is one of the few investments that provides a good return on investment. Over the past 40 years, property investment has only ever provided a negative return on 5 separate occasions. Additionally, the key to making money with property is to only sell when the market is up, if the market is down, hold on to your investment. Owning a home provides a greater return and security than renting. When renting you are not securing a financial future, you are only lining the landlords pockets. Securing a mortgage within your financial budget and providing security for your family and future is one of the best investments you can make.
Truth #4 Paper investments are only worth the paper they are written on.
When making an investment, you need to ensure that you are able to release or obtain cash quickly. Investing in paper investments (It is an investment in anything but a hard asset because you only have a piece of paper to show for your ownership) is not cash until you turn it into cash. So if you are looking for a return within a certain period, you need to make sure that if you have a paper investment, you are not tied to it for longer than you anticipated. For example, you take out a mortgage to buy an investment property, you work on the property, improve it and look to flip it for a good return on investment, but unfortunately your mortgage has tie-ins and fees for early completion and they eat massively into your profit. Also, consider the time frame you will be using a paper investment before you get involved in one, because as I said, it worthless if you can’t cash it in.
Truth # 5 Borrowing money to invest is a fast way to financial ruin.
If you take into account the first truth, then you will understand why this truth should certainly not be ignored. It doesn’t matter if you borrow from a bank, on your credit card or from family or friends, the money has to be paid back, and while you are waiting for your investment to mature, you are spending cash to continue paying for it. Furthermore, a bank or credit card is going to charge you interest, so if your investment doesn’t return the yield you had hoped for, you now have extra money you have to pay back too. Borrowing money to invest is a minefield that you simply can not get through unscathed and is therefore not worth the risk.
I appreciate that these truths are not the most upbeat and encouraging, but they were never meant to be. Sometimes we need to be warned of the dangers ahead before we get into something that will lead us to ruin, and if it takes five short truths to protect you making a big mistake with your investments, then that is certainly a good thing, so I hope they help you as much as they helped others I have shared them with.