Do You Know How To INVEST Your Money?

“It is human nature to think wisely and act in an absurd fashion.” ~ Anatole France

Today I want to talk about INVESTING. Recently I decided to have an experiment to heighten my awareness about my spending decision process. Here what I do now: every time I am about to spend money, I ask myself: “Is it a good INVESTMENT?”

This question makes me pose before buying a snack (good/bad for my body?), or a new piece of clothing (do I really needed it?), or a new training (how will it help me grow my business?); or pose before taking a new position on a stock market (Why am I investing in this company?) or investing in a new property. This practice allows me to have a short pose just enough to make the “buying” decision more conscious and intentional.

What I am trying to say here is that every time you spend your money, you are INVESTING in your life – in your body, your environment, your knowledge base, your business, etc.  Being INTENTIONAL with your spending and viewing it as investment, will help you become a better money manager! YOUR MONEY manager! Does it make sense?

I already shared with you my suggestions about having saving and spending jars (accounts) and today we’ll talk about investing money jar. The purpose of your investing money jar is to grow your wealth over a longer term, for example, over a five year period. This investing money jar is usually meant for retirement funds, children’s college expenses, or long-term dreams, such as a owning a second home or leisure travel.

Since your investing jar has a longer timeline, it is important to find investment vehicles that yield a nice rate of return or ROI, a steady 8 to 10 percent annual return. It’s not easy to find such ROI these days when banks have such a low interest rate (almost negative) on our savings but it is possible to find it outside of the banking system! I am referring to dividend paying stocks, annuity products and rental real estate.

Personally, I like investments that are valued cheap, are hated at the present time and have started to rise. Examples from the past: real estate properties in 2011, precious metals in 2001-2004, stocks in the spring of 2009.

Diversify Your Sources of Income

If you’re starting your investment strategy from scratch, the earlier you start investing with even mediocre interest rates, the faster your wealth will grow. Even small but consistent contributions will fill your investing money jar faster.

Multiple streams of income allow you to grow your wealth faster and provide an additional sense of security due to diversification. Having multiple streams of income is one of the main secrets of acquiring wealth. If you have an existing business, try to automate it as much as possible so that it will not require your constant attention. Once it’s automated, you can invest your time and resources into another business.

The idea is to have multiple streams of PASSIVE income that don’t require your constant attention.  If at the moment you have a full-time job or are still building a business, it likely requires most of your attention and it’s OK.  Just keep the intention of having multiple streams of passive income in your mind and be open to opportunities that may open up for you.

The ultimate goal is to be able to provide a comfortable living for yourself and your family from each individual stream of income. This is a much more prudent way to achieve wealth than getting into risky investments. The idea here is to leverage your skills, experiences, inner wisdom and hobbies to expand your earning potentials.

Samples of Different Investment Vehicles

Below are a few investment vehicles to consider for your Investing money that are diversified among different asset classes:

• Private Businesses–passive or active ownership interest in private businesses (make sure you have proper legal agreements that protect your rights and address your tax liability)
• Rental Real Estate–only properties with positive cash flow which means rental income is higher than all expenses
• Stock Market: Stocks–common or preferred shares of corporate stocks (I like steady ‘dividend growers’); priced in real time
• Stock Market: Stock Options–learn about selling puts and covered calls, otherwise, stay away from option trading
• Stock Market: Mutual Funds–a basket of different companies’ stocks or bonds; priced daily unlike stocks; often have high management fees
• Stock Market: Exchange Traded Funds (EFTs)–also a basket of stocks, commodities or currencies; do not charge management fees; traded like stocks
• Stock Market: Bonds–government guaranteed or corporate bonds; pay interest to debt holders (make sure you research the grade of the bonds)
• Stock Market: Municipal Bonds–issued by municipalities; many are tax-free and offer a nice interest rate but you must research the solvency of the municipality
• Stock Market: Annuities–variable or fixed annuities; could be a great instrument for a retirement investment but most have high management fees and “small font” riders—pay attention and read carefully!
• Different Currencies Investment– diversifying your cash holdings among different currencies (can use currency ETFs or find banks that allow you to hold money in different currencies)
• Art Collection–make sure you know the value of your art pieces and their potential for appreciation over time
• Precious Metal Coins: gold, silver,   platinum–these are “real money” and are both investment and insurance vehicles

These are just examples of various asset allocations to consider. You will do just fine with diversifying among few asset classes. However, make sure that within each of the suggested investment classes you further diversify your holdings. For instance, have different stock positions (do not invest more than 5 percent of your stock market portfolio in one particular stock or bond) or different pieces of rental real estate.

I’ll talk more about investment and risk management next time.

*Some of the text was taken from my bestselling book “A Shift Toward Abundance”.

With Love and Gratitude,

Millen Livis