Why Keeping Financial Strategy Simple Works
It's been said that the simplest solution is often the best. I've found that to be true in many aspects of life, and after a lot of research, I believe it applies to money and finances most of all.
Not surprisingly, most of the TV ads and salesmen you encounter are pushing a different agenda. They want you to believe that you aren't smart (or knowledgeable) enough to handle your own money... and then they let you know that they are happy to manage your money for you. (Because they are so smart)
Now it’s true that the stock market and many other investments can be complex, so a good adviser could help, but that doesn't necessarily make those investments the right choice for you. In fact, it seems to me that if you don't fully understand an investment, then it definitely ISN'T the right place for your money.
If we go back to that idea that the simplest solution is best - it seems self evident that you should put your money in places where you have an understanding and control over how they work.
Make sense?
Ask yourself, are you saving and investing money in places that YOU understand or not? Are you putting your money in places that you have some (or a lot) of control in how to investments perform?
If you don't have much understanding or control over your money currently, I'd invite you to rethink your investing philosophy. Because putting your money into things you don’t control or understand sounds more like "gambling" than investing to me…
At this point I always get some wise guy from the back of the room saying, "What if I don't know about ANY kind of investment?"
That's a valid point - especially coming from the trouble maker in the back...
So here's the answer: If you don't know where to invest, figure out an area/topic/field you'd like to invest in eventually, and then spend time and money to invest in your education. In other words, take some training, classes, or get a mentor so that you can successfully (aka with control & understanding) invest in that area in the future.
For example, if you want to invest in real estate, your first step should NOT be buying an investment property. It’s true that you might get lucky, but you could also lose everything, and that sucks!
When I first started, I spent about $60,000 learning how to effectively invest in real estate, but it made me several million dollars back (so far). I’d call that a darn good ROI on my education!
So, rather than immediately purchasing a property, I believe you should get the training to understand what you are doing and why a particular property would be a good investment for YOU and your family.
In general, if you're not sure why something is a good idea, then the chances are good that it isn't... especially in investing.
I know that sounds like the old-fashioned, slow way to wealth and you might want to be a gun-slinging, go-for-broke investor – but trust me when I say that a little time and money spent in education is worth a LOT of time and money lost in a bad investment. (I’ve seen bad investments cost people YEARS and hundreds of thousands)
It's easy to forget that building wealth is a marathon, not a sprint.
You might find yourself in such a rush to do SOMETHING that you don't take time to do the BEST THING for your success. DON’T BE THAT PERSON – it doesn’t work.
As Robert Kiyosaki said, "Risk is the investor, not the investment"
So invest in your education until you understand the investment so well that it is no longer risky for YOU. At that point, you're stacking the cards in your favor and your odds of winning increase dramatically!
Decades of experience has shown me that investing in your own knowledge is NEVER a bad choice, so don't be afraid to slow down (just a little) and take enough time to get educated.
Nearly every major mistake I've seen people make in investing came because they were in a big rush to make a decision. Either they had money burning a hole in their pocket, or someone else pressured them into a "ground floor opportunity" and they got burned. Don't be that guy.
ACTION ITEM:
Look at your existing investments and savings vehicles and ask yourself to answer the following questions on a scale of 1-10:
1) How well do I understand my investments?
2) How much control do I have over the outcomes of my investments?
3) If something was to go wrong, how clear am I on how I would get out of the investment?
4) Do I understand any fees associated with my investment?
5) If I didn't have money invested in this product/company/service, how much would I care about it?
If you don't like your answers, it might be time to think about making some changes... and if you DO like your answers, great job!
I've found that if you stick with stuff that seems "simple" to you, you're probably investing in areas that you know, understand, and control. But it's when you try to get "sophisticated" that you end up with your money parked in a bad neighborhood. So let's keep it simple and avoid all the trouble!
My main focus is helping people build wealth through using financial strategies and tools that play to your strengths. If we can do that, you'll stack the cards in your favor and can consistently keep risk low, while returns are high! That’s MY kind of investing!
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