Investments

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Income is the Outcome

Investments are a way to produce income by holding an asset to be sold at a higher price in the future (i.e. appreciation via timed speculation). It is the key tenant of value investing. An investment always concerns the outlay of some asset today (time, money, effort, etc.) in hopes of a greater payout in the future; and since it is oriented toward future returns (and no one knows the future) it often carries risk.

Investments have three characteristics that are different from holding money directly:

1. 1. Risk of failure
  2. Less liquid then cash
  3. It offers a potential high return

Investment Steps

Understanding your basic financial picture is the first step toward investing. Investing is not “trading”. Trading is a short-term buy/sell strategy. Investing is a long-term strategy for achieving financial goals. Both involve timing, one just has a longer time horizon.

A good way to think about investing is by asking yourself – Are you long because you like it or do you like it because you’re long???

You can start investing by answering these simple questions and using the Tenth Man Principle:

1. What do you have?
2. What do you owe?
3. What do you make?
4. What do you spend?
5. What are your long-term goals?

EXAMPLES: Common forms of investment include financial markets (e.g. stocks and crypto), credit (e.g. loans or bonds), assets (i.e. commodities, artwork, and real estate), and by starting/expanding a business.