What are your financial goals?
Just as each individual is completely unique, so are the needs of every investor. In fact, it would be foolish to think that there is one simple financial solution for every investor out there. Would you not agree? That is why it makes perfect logical sense that people require different financial goals based on their needs. Of course, always looking at things logically with respect to investing and finances is another issue entirely (and removing emotion from sound financial planning and investing decision-making another series of articles in and of itself). But let’s say this at least about goals: goals, after all, are a complete reflection of who you are and what level you are currently in life.
What may be important to a young 20 year old investor may be extremely different from someone over the age of 55. In fact, your personal goals are likely to change over time as you reach different levels and have different needs. Let me make this simple…
Normally, your financial goals will be defined by the time it takes to realize your return. Here’s a simple example. In one of the coaching sessions I had with a young investor I learned that his short-term goal was to go on a vacation to back-pack through Europe. His mid-term goals were to own his very own home for his family and his longer-term goals were to own a 200 unit apartment complex.
Other older investors in our network are focused on other priorities; both immediate and far off into the sunset (you do know human beings keep living ever-longer lives, right?). Some of their short-term goals are to have a decent retirement account that keeps them in their comfortable lifestyle. Now, if you would have waited till this point of your life to consider your choices for providing the type of income you would need to continue with this comfortable lifestyle, you will certainly find yourself under a mountain of pressure. Do you follow me so far?
Whether you are young or older, to retire with comfort you need a strategic plan to both save and invest your money. Saving and investing are critical in ensuring that you achieve your financial goals. Here is the way I highly recommend you look at Saving & Investing.
- Saving is putting money aside (normally in a savings or money market account) for a limited time period. One great reason for saving is to build up lump sums of cash to invest in opportunities that will put your money to work for you. Simple enough, right?
- Investing is buying assets of value- such as bonds, currency, stocks, real estate etc. These type of investments have the potential to generate monthly income, increase the underlying asset value over the long term or, preferably in most cases, do both.
Many people feel overwhelmed or intimidated when they talk about investing because of the great variety of investments out there. To keep things simple I will show you a simple way of understanding the different asset classes.
Same as Cash: Any asset that you can convert to cash with little to no loss of value is considered cash equivalent. Certificates of Deposit (CD’s) and Treasury Bills (T-bills) are examples of owning assets that are the same as cash. These relatively high-liquidity savings-investment vehicles offer less risk which means that they typically will yield lower returns.
Debt Securities: If you purchase a security such as a note or bond, you are in effect lending your money to the government, agency or company responsible for backing the debt security (i.e you are lending your money to the party offering the security). In essence, you have become the bank! In return, the debtor is promising to pay you interest in addition to your principal. These notes or bonds will typically have a fixed maturity date. Each loan will be differentiated by the terms and conditions of the written agreement, collateral and credibility of the debtor— with corresponding differing values for risk and returns.
Equity Securities: If you own an equity security (AKA Stock), you own a piece of the company who issued the security—no matter how small that piece happens to be. You can hold stocks directly or indirectly through other funds that own a multitude of securities. Bottom line: when you own a stock you partake in that company’s success or failure. Though many consider stocks to be a bit risky they can also offer great returns.
Tangible Property: When you own tangible property (AKA hard assets), you own an actual thing (not its derivative or a division thereof). The best example is real estate such as land, property, commercial buildings etc. The beauty of owning real estate is that history has proven that it doubles in value every 10 to 14 years. Another valuable element of owning tangible property is that it not only offers growth in value, it also can offer monthly income, thus increasing your profit potential. Other hard assets include gold, other precious metals and commodities in tangible form.
To Recap: To become a successful investor you will need to begin setting solid financial goals, understanding your needs (now and in the future), identifying the types of investments that best suit those needs and, finally, executing your plan of action. Over the next couple of articles I will cover some important elements of investing to help you identify your risk tolerance and help you to focus on building the right portfolio that suits your lifestyle.
Rick Melero invites you to learn more about how hard assets can make your portfolio solid, by investing in the tangible. Get 8-10%+ Passive Secured Returns and ask about the Infinite ROI Program with HIS Real Estate Network at http://www.hisrealestatenetwork.com/contact-us.php or be sure to research more about investing with real estate using the free real estate investor search engine at http://www.hisrealestatenetwork.com/real-estate-investor-search-engine.php
