What is a Good Investment?
The title is sort of a trick question as the answer will be different for different people and their differing needs and skill sets. Looking up the definition of investment, the broadest one is “an act of devoting time, effort, or energy to a particular undertaking with the expectation of a worthwhile result.”
There is an investment guru, Garrett Gunderson, who talks about finding your investor DNA. To me, this is about knowing your own strengths, and weaknesses. Knowing what makes you uncomfortable because it feels too risky, and what drives you. And, what do you want to accomplish in this life? Here’s a link to more detail on just what this is: https://5dayweekend.com/keep-more-money/investor-dna-worksheet/ I like it in part because it’s not the same old stuff we’ve been given all our lives… essentially scrimp and save, which people seldom do well. Clearly, financial literacy* and street smarts about investing are not taught in most schools. We as a nation, have a pretty dismal understanding of how money works. That may be why the top one percent of Americans have roughly the same net worth as the entire middle class. Here’s an article about it: https://www.bloomberg.com/news/articles/2019-11-09/one-percenters-close-to-surpassing-wealth-of-u-s-middle-class
Mr. Gunderson is looking at things using a different perspective and I’m a fan of having multiple perspectives! I don’t know for sure that his methods work, but no doubt how well they work depends a lot on the student.
Using his DNA worksheet, it becomes clear that real estate is a good fit for me because I’m comfortable with it. Also, being a contractor, I can fix it up, and give it value, both with my hands and what I know about building and efficiency. I can take something that was thought to be a tear down and make affordable housing from it, so there is a social goods piece as well. I get to help people. My father was a lawyer, but he did well with real estate because he was able to fix up legally distressed properties. So, what are you good at? What do you like doing? Can you bring those talents to an area that needs them and will reward you for using them?
Back to the title, have you considered that investing in yourself is probably the finest investment you can make? That investment has the possibility of paying back for the rest of your life! I’ve had the same Skilsaw for over forty years. It probably cost $40 way back when. I’ve built homes with it, and a lot of other stuff. I’m pretty sure it was a good investment! Even more important is that I’ve been lucky with mentors. Good people have been willing to teach me some of what they know, and those lessons continue to pay me back for the time I spent learning. My mentors invested their time in me and I’m not about to let that time be wasted.
So, what is a good investment for you? If you think about what matters to you, what you’re good at, what you want to learn, and what can help you reach financial independence, it should become pretty clear where your investment energy should be put.
*Financial literacy is a study unto itself and an interesting one. Here’s a quick definition: “Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing. The lack of these skills is called financial illiteracy.” If you do a search for “financial literacy training”, you’ll see some good info to, at a minimum, help you ask good financial questions.
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Looking back over my working life of 50+ years, it seems clear that self sufficiency has always been the best way for me to be useful. Now, mix in a strong interest in water in its many forms and the wide world of animals and you'll know what's important to me.