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In the last few weeks I have provided a crash course lesson in personal finance, and covering the categories of financial management along with the sub set of skills/abilities involved with each. I explained how running a budget is just one category of financial management, but also how it is the foundation for which the other categories of financial management are able to be built.
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I talked about how financial planning is the category of personal finance that measures an individual’s respect for their money, and responsibility for sustaining the futures of their own lifestyle. This is where the third main category of personal finance comes into account, and this category I am referring to is investing. Investing makes the world go round, not only in terms of our economy, but also in terms of our way of life. It is a gesture of giving back to the economy that is responsible for producing the provisions necessary for sustaining your lifestyle, and it is also the process of supporting or introducing assets in an economy.
How to Invest
Investing makes the world go round, because when it is done right, it is how we as individuals are able to provide appreciation to the economy. I will save the topic of appreciation for a future blog post, but basically whenever there is appreciation it simply means that value has been created or increased. Appropriation is a sub-skill of budgeting, and the principles of this skill derive from “The Ancient Babylonian Rules of Money Via 21st Century Language”, as do the principles of the other skills involved with personal finance. It’s mentioned in budgeting that it is important to pay yourself first. Investing is where you revisit that ten percent from your paydays that you have been setting aside.
The ten percent that you set aside from all your paydays is what is called, investment capital. There is only one purpose for investment capital, and that is to build an asset portfolio. An asset portfolio is your personal “folder” filled with wealth preserving assets that you own. You may have heard someone in finance talk about “diversifying your portfolio”, and what that means is to invest your capital into multiple asset classes. In a nutshell, asset classes are investment vehicles that preserve and/or appreciate value. Of course there is the “risk” of investments losing value, but this is why financial planning, and learning proper due diligence, is one of the big three categories of cogent personal finance. The only sub-skill of investing is asset allocation.
Asset Allocation and Building Your Portfolio
Asset allocation is a portfolio building skill of investing. Once you have undergone some financial planning, you will begin to gain an understanding of how the markets within the economy work. Once you have an understanding of the markets, you will become better equipped to develop an investment strategy that will help you build a portfolio that will help you achieve your long term financial plans. Allocating investment capital for assets is the equivalent to appropriating money to fund your lifestyle. Asset allocation is a skill that not only requires specialized knowledge of the markets, but also revolves around risk vs reward, based on the amount of time you have to execute a financial plan. You may find it difficult to build a fortune five hundred company if you find yourself to be at the age of sixty five, with very little investment capital and business experience. The following is a list of basic investment ideas from each of the four asset classes that you may allocate your investment capital into, and furthermore do not fret if you have little investment capital. You can still be investing your time in educating yourself in different investment strategies of a particular asset class while you continue to accumulate capital.
Employment
· Education (invest in a college degree) to build a career
· Create a “self-employed” job
Paper & Commodities
· The Stock Exchange, Contracts, Business IPO
· 401k, Mutual Funds, Bonds, and other Banking Products
· Royalties, Patents, Licensing, and Lending
· Precious Metals, Fine Art, Collectables, and Rations
Real Estate
· Residential, Commercial, Land
· Leases, Rentals, Easements
· Flip, Buy and Hold, Development
Business
· Product and/or Service ownership
· Franchise, Brand, and Trademark Ownership
· Legal Entity Ownership/Partnering (business system/holding company)
Investing makes the world go round, because when it is done right, it is how we as individuals are able to provide appreciation to the economy. I will save the topic of appreciation for a future blog post, but basically whenever there is appreciation it simply means that value has been created or increased. Appropriation is a sub-skill of budgeting, and the principles of this skill derive from “The Ancient Babylonian Rules of Money Via 21st Century Language”, as do the principles of the other skills involved with personal finance. It’s mentioned in budgeting that it is important to pay yourself first. Investing is where you revisit that ten percent from your paydays that you have been setting aside.
The ten percent that you set aside from all your paydays is what is called, investment capital. There is only one purpose for investment capital, and that is to build an asset portfolio. An asset portfolio is your personal “folder” filled with wealth preserving assets that you own. You may have heard someone in finance talk about “diversifying your portfolio”, and what that means is to invest your capital into multiple asset classes. In a nutshell, asset classes are investment vehicles that preserve and/or appreciate value. Of course there is the “risk” of investments losing value, but this is why financial planning, and learning proper due diligence, is one of the big three categories of cogent personal finance. The only sub-skill of investing is asset allocation.
Asset Allocation and Building Your Portfolio
Asset allocation is a portfolio building skill of investing. Once you have undergone some financial planning, you will begin to gain an understanding of how the markets within the economy work. Once you have an understanding of the markets, you will become better equipped to develop an investment strategy that will help you build a portfolio that will help you achieve your long term financial plans. Allocating investment capital for assets is the equivalent to appropriating money to fund your lifestyle. Asset allocation is a skill that not only requires specialized knowledge of the markets, but also revolves around risk vs reward, based on the amount of time you have to execute a financial plan. You may find it difficult to build a fortune five hundred company if you find yourself to be at the age of sixty five, with very little investment capital and business experience. The following is a list of basic investment ideas from each of the four asset classes that you may allocate your investment capital into, and furthermore do not fret if you have little investment capital. You can still be investing your time in educating yourself in different investment strategies of a particular asset class while you continue to accumulate capital.
Employment
· Education (invest in a college degree) to build a career
· Create a “self-employed” job
Paper & Commodities
· The Stock Exchange, Contracts, Business IPO
· 401k, Mutual Funds, Bonds, and other Banking Products
· Royalties, Patents, Licensing, and Lending
· Precious Metals, Fine Art, Collectables, and Rations
Real Estate
· Residential, Commercial, Land
· Leases, Rentals, Easements
· Flip, Buy and Hold, Development
Business
· Product and/or Service ownership
· Franchise, Brand, and Trademark Ownership
· Legal Entity Ownership/Partnering (business system/holding company)
