Posted by: docktohome | June 8, 2011

Reconsider your Investment Portfolio

If you have thought about your future you probably have realized that you will need to make some sort of investment decisions.  Many of us do this through employee retirement plans and retirement accounts.  There are basic things that should be considered when looking into any type of investment.

Key Considerations

  • How much money will I need
  • What is my return on investment & in what form will I receive it
  • What is the duration of the investment
  • What risks are involved
  • Is there an exit strategy

Every person investing is coming from a different starting point.  This can vary by the amount of capital available, the experience and knowledge of the investor, and of course the availability of investment options.  When investing it is crucial to pay attention to the facts and not to your feelings.  An investment made from an emotional stand point is usually faulty, as an individual will tend to look past red flags and focus on the façade of an otherwise questionable deal. 

Currently many people believe that investing their money in bank savings accounts, certificates of deposits, or government securities are safe investments.  Being given a guaranteed a rate of return is irrelevant if the return offered does not outpace the rate of inflation.  Unfortunately the current rates offered on these types of investments are so low that they are not surpassing inflation or are so minimally surpassing it that the investor is barely gaining anything.  This to me makes these types of investments risky and simply idiotic.  The other most common investments are your stocks, bonds, and mutual funds.  These investments have proven profitable for quite a few people in many different scenarios but in my opinion the average investor will not see significant returns in stocks, bonds, or mutual funds nor will they have any guarantees in a sudden market downturn.  The stock market can fluctuate for wide variety of reasons and an individual stock holder has virtually no influence on changing the circumstances of their investment.  No control = risky investment. 

So why do so many people invest in these avenues??? Simply because they are the most common types and if everyone else is doing it then it must not be risky, right? WRONG.  Another reason is that the majority of people have not been educated on different investment options such as precious metals, LLC’s, joint ventures, secured and unsecured notes, commercial paper, tax liens, real estate etc.  These types of investments are very foreign to the average investor and therefore perceived as risky.  Conversely they likely don’t know anything about the stock market or bond market but just thinking they do is sufficient to further the belief that they have invested wisely.

In my next article I will go over alternative investment options such as becoming a private lender or investing in pre-existing real estate notes.  I will explain how these investments can provide fixed returns that are secured by real property and offer more security and transparency than the earlier listed investments.

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