I was out with a friend for lunch the other day. He is fairly pessimistic about investing and when I was talking about different investments, he said I sounded like a salesman. I was super proud of that remark because one thing you learn about successful people is that they are constantly looking around them at everyday life and looking for opportunities. Constantly selling themselves.
One of my favorite books covers the creator of the Rainforest Cafe, Its a Jungle in There. In this book, the author was always looking for opportunities.
My friend has a large amount of cash and I told him I didn't have any good advice for his money. He has it is a savings account. After some research I might suggest a CD, tax-free municipal bonds (or other bonds) or an annuity. These are from safest to most risky but are all fairly safe.
Years ago, I had a good friend of mine who had $20,000 in a savings account and had the same attitude toward money. I told him to just stick it in a CD, which back then was paying 5%. He thought that was too risky. I told him that CDs were not risky at all and that I was pretty sure they were even FDIC insured.
Needless to say, he didn't do that. I took my money and placed it in CDs. Years later, I used the money to place 20% down on a house. His money in the savings account was too liquid and he slowly spent a large portion of it, bringing it down to $13,000, which would have been the equivalent of $10,000 if you include inflation. So basically he not only didn't keep the money protected from himself, but also let inflation of about 2.5% per year kill his money.
Focusing on saving even when not making large returns can be better than losing money or not saving anything. And just like constantly looking for business opportunities, one should constantly look for vehicles to invest the money in. And by that I mean learn more about common vehicles rather than getting caught up in the "new" unqiue way to invest.
No comments:
Post a Comment