What is your goal when investing?

Read that again.

What are you really in it for?

If your purpose is to build wealth like most people, I’ve news for you. Before you stick your hard earned cash into just about anything, you need to know:

  1. The two most important things in investing
  2. Which investments you should stick to, and which ones you should avoid

And just so we’re clear, I’m using the term “investments” a little more loosely here to define money making instruments. Most of them can be grouped into one of the quadrants below

Serious / Short Term

With interest rates at all time low, this list is increasingly getting shorter. Nothing really much to see. These are the type of investments that your grandma would approve of. Because it’s safe. And boring. But pretty good if you have short term wealth goals or want to maintain cash at hand.

Some examples:

  • Short dated fixed deposits / Certificate-of-Deposits (CDs)
  • Short dated bond funds

Serious / Long Term

This quadrant is where you should aim to put most of your assets in, if you’re looking to build your wealth.

WHY? I hear you ask.

Because my friend, these have stood the test of time. And while some of them may not work out eventually, you have a better chance of building up your wealth base by focusing on these.

So there, here are some examples of mostly boring-as-hell (but profitable) asset classes reside:

  • Mutual Funds / Exchange Traded Funds / large cap stocks
  • Investment Grade Bonds
  • Savings / Deposit accounts
  • Real Estate
Photo Credits: Martin Schoeller via Forbes

Fun / Short Term

The mere mention of some of these is enough to get your adrenaline rushing, your blood pumping and your head pounding. But sooner or later you will come to realize that fun and short term investments are largely detrimental to your pocket.

Examples include:

  • Buying a lottery ticket
  • Going to the casino
  • Get-rich-quick Ponzi schemes / seminars / systems
  • Trading if you have no idea what you are doing
  • Getting involved in speculative stuff which you have no clue about (short term options, bitcoin, fancy schmancy structured products)

Fun / Long Term

Ah, here’s where things get REALLY interesting. If you have spare cash after building your structural wealth foundation (from quadrant 2), you should to spend the rest of your time and resources here.

  • Bankrolling your friend’s restaurant
  • Running a business you are passionate about
  • Riskier more volatile versions of traditional assets like penny stocks, or junk bonds
  • Investing in alternative investments (physical art, wine, private equity, digital assets like Bitcoin and NFTs)
  • New platforms which have surfaced more recently, such as roboadvisors and peer-to-peer lending platforms.

So, your keen eye may have noticed that I’ve classified things like Bitcoin as funny money. As you start to understand more about the asset that you’re getting involved in, your view on it may change. A deeper understanding can allow it to evolve from a funny money perspective to something more serious.

Also, that really depends on whether you’re (1) Buying and HODLing or (2) Flipping it for a quick buck. I can’t answer that for you, so you need to define it for yourself.

Some investments can be a little bit fuzzier and might be blur the line of short/long term.

But as long as you keep in mind the (1) purpose and (2) original intended tenor. Because you certainly don’t want a “short term” investment to span out 40 years before eventually breaking even.

Look, I get it. No one wants to take the long boring route and get rich S-L-O-W-L-Y. And that’s why it’s so difficult to build your wealth base. It takes time and discipline. There I said it – the two most important things in investment.

P.S. Nothing in this post is to be considered legal or financial advice. All of the writing here is meant for information and entertainment purposes, so DYOR and make decisions based on your own beliefs.

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