Investing: What You Need To Know To Succeed

Investing is a fantastic strategy for making your money grow. There are many forms of investing; from real estate to index funds to bonds, there are so many choices. Let’s take a look at what you need to know to make yourself an intellectual investor!

Educate Yourself First and foremost, talk to other investors. Find out what tips and tricks they have learned along the way. Pick the brains of all the knowledgeable people that you run into. Online real estate sites and social media are good places to look for real estate investors to befriend. Think about attending group meetings and join forums. Financial mentors who have a proven track record of successful investing can be a huge asset to you in determining how you want to invest your money.

A financial advisor can be incredibly helpful in helping you set up your investment portfolio. There are SO MANY funds and vehicles you can sink your money into. An advisor will help ensure you don't throw your money onto a sinking ship. Do your research. Ask friends and family members for suggestions on finding a trusted advisor that is a good fit for you and your money.

Real Estate This is an area of investing where doing your research is crucial! Whether you are looking into multi family units, single family homes or entire buildings, do not purchase anything that has not been inspected by an unbiased professional. The seller may offer to pay for an inspector to inspect the property but they may know the inspector who will favor the seller. You will want to get a full report from a neutral professional. Be cautious of properties where the price seems too good to be true. There's a reason that property is cheap, and you don't want to be the sucker who finds out why! You want to purchase properties that will ultimately get you the best return for your money in the shortest amount of time. Run the numbers before even considering purchasing a property. Start with this formula

Monthly Gross Income (The amount you collect from a tenant) - Monthly Operating Expenses (taxes, insurance, repairs, HOA, utilities, etc.) = Monthly Cash Flow

Make sure your monthly cash flow is positive. If not, run like you're being chased by a crazed clown with a fire extinguisher flame thrower! Understand the value of your time when it comes to fixer upper opportunities. While you may like to invest in properties that need a little TLC, you have to decide if they are worth your time. Or, are you better off handing the work off to someone else and spending your time hunting new opportunities? If you can delegate any tasks, you should do it. It is worth taking the time in understanding important basics when it comes to real estate investing.

Index Funds and ETF's These funds are my personal favorite investment vehicle. You may be asking what in the world is an index fund and an ETF??? Well, here is the readers digest version. Both of these funds track a financial market index like the S&P 500. These types of accounts offer broad market exposure at low operating costs. Both of these funds are pretty much the same with the exception that ETF's can be traded throughout the day whereas index funds can only be traded at a set price point at the end of each trading day. Historically, both of these funds have performed well so if you had to pick one or the other it could be determined by a coin flip. You would be better off comparing them based on price and fees. We currently invest in both stocks and ETF's with Vanguard. Some of their best investment options charge as little as 0.03 per year. This means for every $10,000 you invest, you're only charged $3. While index funds and ETF's are more risky than bonds or savings accounts, the returns over the long run are substantially higher. It is really dependent on your risk tolerance.

Savings Accounts and Bonds Speaking of risk tolerance, if you are the type of person that cringes at the thought of losing a dollar, then high yield savings accounts and bonds may be a good option for you. A high yield savings account is like snuggling your money in a cozy cloud that will always be there when you need it. These accounts will generally earn you less interest than putting your moolah in the market, but this can also keep you from gaining substantial returns and making great savings strides with compound interest. However, if putting your money in the market is going to cause you to bite your finger nails to nubs and cry yourself to sleep in a dark corner every time the market takes a dip, a savings account is going to be your best bet.

Bonds are another safe investment tool. Bonds are issued by the government or a corporation when they want to raise money. Basically you are giving the government a loan in which they agree to pay you back the face value of the bond at a certain maturity period. Generally they will pay you a small percentage of interest as a thanks for the loan. This will usually happen twice a year, but there is a caveat to this. Bonds will have a maturity date meaning you agree to the terms of this "loan" for a certain amount of years. Sure you will possibly be earning a higher rate of return than a savings account, but your money will not be accessible for the duration of the bond. As of writing this, 10 year treasury bonds are being issued at a 3.67% interest. This may sound awesome right now since the market is not necessarily doing the greatest at the moment, but if the market decides to take a massive up turn and your cash is held up in a bond... let's just say that's a lot of money that will vanish before your eyes.

There are so many avenues you can explore when deciding on how to invest your money. Just don't be dumb and throw a bunch of cash at what you think may be the latest and greatest investing fad (like the time we tossed a crap ton of money into foreign marijuana stocks because Canada had just legalized it, only to lose ALL OF IT a year later). Do your research and make smart decisions. The market will always have ups and downs but if you can stick it out for the long run, you will see your wealth blossom into a beautiful garden... but not a marijuana garden.