As a beginner level investor, you’re wondering, “What are some of the most profitable investments I can make?”
You don’t want to choose the one that empties out your lifetime savings and leaves you worse off than where you started. But with all the investment noise out there, who do you listen to?
Many options exist: bitcoin, cryptocurrency, stock markets, real estate, mutual funds and index funds, and commodities like gold and oil. You’re reading and watching everything you can about these options to find the one that will make you rich. But which one is the right one to pick?
You hear one person telling you that bitcoin and cryptocurrency are the way to go, and another person saying that they are very risky. If you’re more conservative, you want to go with the historically proven options like mutual funds and real estate. Some are more liquid, others more volatile. Determining whose advice to follow is exhausting.
You’re probably thinking an easier option is to copy what I do because you like my results. If you want to be a millionaire or billionaire, find out what they do and do the same, right? I disagree with this line of thinking. The first thing you need to do is decide what type of investor you are.
Determining What Type Of Investor You Are
First of all, before you even decide what investments are best for you, let me tell you that what low and middle income people invest in are different than the investments of high income people.
When you reach a certain level of income, the investment world opens up to you, and you have a lot of investment options that you haven’t even heard of before you became wealthy.
So first, determine what kind of investor you are. It’s like deciding what kind of car you want to buy. Start with general questions and work your way to more specific ones.
Do you want to buy a car for leisure or business? Who will you be driving and where will you be driving? You might want a SUV to take your family to places. Or you might be looking for a sports car for some weekend fun. And even if you are looking for a sports car, you have many options for model and make of car. Choosing investments are the same as choosing a car.
The type of investment you want when you’re younger will be different than when you’re older. What you want when you’re 20 to 30 years old is different than when you’re 40 to 50 years old. It’s a difference between growth versus security.
When you’re younger, you want growth because you have the time to ride out the ups and downs. When you’re older, you want to protect your capital. You want security because you don’t have the time for long term growth, or long term risks.
So if you’re wondering what are the most profitable investments for you, then you’re probably looking for an easy answer. You should spend time to look for some clarity as an investor. What matters more to you? Growth or capital gains? Security or dividends?
To make an analogy, I can’t give you advice on what car to buy if you’re not sure why you want a car or what you’ll do with it when you have it. But say you do know what type of investor you are. What’s next?
Determine What Type Of Returns You Want
Next, you want to decide if you are a cash flow or capital gains type of investor. What’s the difference between the two?
Cash flow investors like to keep their investments for a long period of time so they can continue to collect a regular income. For example, if you own a stock, it can generate money as a dividend.
Capital gains investors get an income when an investment is sold at a higher price than what they originally paid for it, such as when a share of a stock is sold.
I don’t like stocks. Instead, I prefer real estate and investing in businesses. With stocks, I can’t call the CEO and tell him or her that I don’t like where the money is being spent for the company. I don’t have any control.
I also don’t like the speculation involved in stocks. With cash flow investing, I know I can consistently get 10 percent back every year so I know it will take ten years to get my money back on my investment.
Real estate investments offer cash flow if you invest in income properties. For example, I can add value to commercial real estate to increase its value or by having a tenant. This is just my preference. I have a friend who is doing very well with stock investments.
The investments you want depends on what returns you want and where you are in life right now.
Invest In Yourself
If you’re making less than $250,000 per year in income right now, then invest in yourself. Upgrade your skills, your knowledge, your skill set, and your earning ability. Here’s how.
For example, you are a consultant making $250,000 a year and you need more cash. You take a program that costs $10,000 and the program teaches you how to run a workshop instead of working with your clients one-on-one. After the program, your workshop makes you $50,000. Where else can you get such a high return?
You got back more than 50 percent from your investment. If you invest in yourself, that skill stays with you. I like to invest in workshops or hiring advisors to invest in myself. This is one type of investment that applies to you, no matter what your age.
You can learn how to be more effective at running your business. You can learn marketing or how to acquire customers. If you spend $3 and get $5 back for each customer, that’s a 100 percent return. You can’t get that from a passive investment.
Now that you’re making six figures from your business, then start investing in something you understand. Don’t get greedy or think you are missing out if you aren’t investing in the latest trends.
One of the most successful investors in the world, Warren Buffett, said, “Investing in yourself is the best thing you can do. Anything that improves your own talents; nobody can tax it or take it away from you. They can run up huge deficits and the dollar can become worth far less. You can have all kinds of things happen. But if you’ve got talent yourself, and you’ve maximized your talent, you’ve got a tremendous asset that can return ten-fold.”
So if you want to invest in the most profitable investments, start with yourself.
How do you upgrade your skills or knowledge? Comment below.