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Where should I invest? The brief, honest, straightforward guide Where should I invest? The brief, honest, straightforward guide
by Joseph Gatt
2019-06-08 09:03:43
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Financial advisers don't think in terms of “how can I help YOU make money” but in terms of “how can YOU help ME make money.” They tend to sell you all kinds of dreams, stories about people who invested in hedge funds and now live on their boat, people who made a fortune in real estate and now live in the Caribbean, people who made a fortune in real estate and now live on a champagne and caviar diet. You give them your money, and now they're the ones on a champagne and caviar diet.

So imagine I'm a financial adviser (I'm not so take this with a grain of salt) and you were to ask me what to do with your money. Here's what I'd say.

invest01_400What's your monthly income? Do you barely survive with your income? Do you help others with your income. Or are you rich enough to be able to stop working and still live a very decent life?

If you're barely surviving with your income, my advice tends to be “stop dreaming of the financial market.” Don't cut corners. Don't try to make money by buying rental property or investing in the stock market. That probably won't work. Instead, focus on gaining experience in your field, getting a degree or certificate to beef up your resume, learn a couple of skills, network your way to a higher-paying job. Your safest source of income will be your paycheck, and my only advice is to focus on getting bigger paychecks.

If you live a comfortable life, have a family to feed, but are not quite “rich” and need some extra money, say to save for your children's college, to save for medical emergencies, or to save for a comfortable retirement, here's my advice on investment.

A lot of people say “buy gold!” because it's “inflation proof!” Gold is a flawed argument. Now if you live in South Korea or in India or in any other country where the local currency is a little risky, I would suggest you stack up some gold. If you live in a country with an unstable currency the more gold you have the better, but foreign currency like dollars or Euros also work instead of gold. That way if the rupee dips you can convert your gold for dollars or Euros or any other currency. Gold just gives you the luxury of picking the higher valued currency. 

But assuming your salary takes inflation into account, you don't need to bother with too much gold. Economic pundits have been crying wolf for 10 years or more saying that the US Dollar would collapse, but the US Dollar never did. If the US dollar did collapse, we would have an economy like the Afghan economy. In Afghanistan, people buy houses and cars and motorcycles with gold rather than Afghanis, because Afghanis are worthless. But in Afghanistan most people starve anyway, and Afghanistan is a failed state. If the US Dollar were to collapse, the rest of the world would be a confederation of failed states, and you would probably be drafted by the air force or navy. So don't worry about your dollars.

So you could buy a little bit of gold if you like gold. But here's the thing with gold. Yes gold prices have been stable since the 1950s and gold is a recession proof  and inflation proof investment. But it's a recession proof investment for that guy who won the lottery in 1952, and stopped working and invested in gold. For the rest of us, we get our monthly paychecks. As for that argument that you need to use your savings to buy gold, I find that argument flawed because you tend to save a lot more money during the last 20 years of your career than during the first 20 years of your career. Most of your savings will be during the last 10 years of your career. But if you're good at saving money, buying a little bit of gold or silver never hurts.

Real estate is a risky investment, because like a bad marriage, it could end in divorce and chaos. The idea behind real estate is that you buy a house with a mortgage, pay the mortgage that you finance with rent money you get from your tenants, and keep the difference. Some people are good at this and it works for them, but for a lot of people it's a nightmare, simply because they aren't getting any tenants, or tenants think the rent is expensive, or simply because rent prices fluctuate from one area to another.

The idea when you invest in rental property is you're going to have to rent that place every single day for the next 25 years. If you get one bad year, or a couple of bad years, you're doomed. The other thing is a lot of people buy an apartment and rent it out, and then they see they're making money from it and they decide to buy three, four, five, six apartments and rent them out, and that's when the problems begin. Finding a tenant is easier than finding six or seven tenants. 

Stocks, bonds, hedge funds, mutual funds and other derivatives. If you believe in their investment, and want to contribute investment money, go ahead. Think of them as a donation rather than as a personal investment to make money. A lot of people make money from buying a few stocks, think all stocks automatically yield derivatives, then spend all their life savings on stocks. Don't go there. And yes, stocks and bonds and the rest are addictive.

If you're rich, you'll want to die rich. You don't want to be one of those people who were rich and died poor. So buy yourself a nice house, get yourself a nice car, hire a good driver, hire the best possible chef, hire staff to clean your house, take a few vacations, and keep in mind that if the dollar ever collapses, you're going to be flying a plane dropping bombs somewhere, so don't worry too much about investing. Keep doing whatever's helping you make money, or retire and live off the interests on your savings account. And do a little bit of reading, think about the economy, and vote carefully and responsibly.

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