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In a sea of investment choices, it can be overwhelming to determine which are the best investments for you. But don’t let overwhelm keep you in the dark, procrastinating, making mediocre decisions, losing money, and perpetually frustrated. The first step to confident investing is having a clear picture of exactly what you want and WHY. Knowing what you want allows you to set goals that will advance you towards your destination and measure your progress. Secondly, prepare. Next, you need to be armed with the tools to identify opportunities that match. Finally, you implement, measure progress, and repeat.
Define successPrepareIdentify opportunities that matchImplementMeasure progressRinse and repeat
Table of contentsWhere Investing Fits into the Cash Flow SystemHow Do I Determine the Best Investments for Me?Asset CategoriesPaper AssetsCommoditiesReal EstateBusinessThe Tale of Two InvestorsThe Frustrated InvestorThe Actualized InvestorTwo Views of InvestingExternal Investing Is About PickingInternal Investing Is About Being the Person Who Invests WellWhat Investments AreWhat Is the Value Proposition?Investing Is About PeopleYou Are Your Own Best InvestmentYour Greatest Value: Your Unique AbilityThe Formula for Financial SuccessThe Magic Ticket: Investor IdentityThe #1 Secret to Lowering Investment RiskActive vs. Passive InvestingYour Second-Best InvestmentInvesting Outside Your ExperienceFocus vs. DiversificationBest Investments Thinking ExercisePassionKnowledgeUnderstand the Value PropositionControlCash FlowThe Unpardonable Sin of InvestingIn ConclusionHow Investing and Saving Work TogetherTake ActionThe 7-Part SeriesCreate Your Time and Money Freedom
Where Investing Fits into the Cash Flow System
In the Cash Flow System, you first keep more of the money you make. Then you protect your money. Finally, you increase and make more.
Investing is part of stage 3. Building a cash-flowing asset portfolio of real estate and business accelerates time and money freedom.
In the last article, Saving vs. Investing: What is Investing? Part 1 – Cash Flow, we’ve illustrated the power of cash flow in creating financial freedom.
Before that, we discussed the preparation of habitual saving that allows you to build usable capital.
Today, we’ll help you select your opportunities by answering:
How do I determine the best investments for me?How do I minimize risk?
We’ll help you determine investment options for you by showing you that the answer lies in the most unexpected place.
And then we’ll give you the #1 secret to lowering your investment risk.
How Do I Determine the Best Investments for Me?
Now that you have a vision for what you want your investments to do, let’s go shopping. How do you figure out what the best investment options are?
Asset Categories
Instead of narrowing down your choices, we first need to expand the options. Unfortunately, what you’re typically offered is like seeing the appetizer menu only, when there’s a full range of salad, soup, entrée, dessert, and cocktail menus to choose from.
While you may have been led to believe that your options are all housed in the stock market, the world of investing is much broader.
There are four main asset categories to choose from:
Paper AssetsCommoditiesReal EstateBusiness
Paper Assets
Paper assets include stocks, bonds, mutual funds, options, savings accounts, and the forex market.
Within this category are equities (stocks), fixed income assets (bonds), and cash equivalents that include money market accounts.
Often, paper assets are wrapped into a basket of mutual funds with various risk levels.
There are many ways to invest in the stock market, including using a broker or through an individual brokerage account. Strategies range from buy-and-hold, to options trading with puts and calls.
Commodities
Commodities are real, hard assets like gold,