My Investment Strategy

Defining “investment”

For a simple definition, I’ll turn to Wikipedia:

Investment is the choice by the individual to risk his savings with the hope of gain.

What does this include? Most people think about stocks when they hear the word ‘investing’, but it could also mean a variety of things. This might include buying a very cheap second hand car for the purpose of selling it again. It’s also an investment if you buy old houses or apartments so you can fix them up and rent them out. The capital you use for a business can also be considered investments. In high school, my sister used her allowance to buy cheap sign-pen ink by the bulk and sell them at school for a profit - even that is considered an investment.

But there are also broader definitions of the word. Some people might say that buying a good suit to wear for a job interview is an investment.Taking part in a paid workshop or seminar might also qualify. The point is that the word “investment” can mean different things to different people, but for the purpose of this blog post, I’ll use the definition above.

My own investments

To give an example from my own background, let me list some of my major investments:

• Businesses that I understand well. The first major venture I invested in was Web Content Wow, a web content provider. At that time (it was 2003), I spent around $10 for the domain name, $6 for the hosting, and around a total of $150 on other miscellaneous resources. I also hired some writers I knew who could work with me. Considering the low capital, I made a profit within the first month.
• “Virtual” real estate. Domain names, blogs, and websites are the houses and condos of the internet. You can buy and hold, develop them, or sell them to others when they become more valuable. If you want this investment to be more passive, you can hire other people to do the maintenance for you.
• Information products meant for sale. I recently got into selling information products as an investment. This includes e-books that I publish or e-books from affiliate programs. Someday, I hope to include audiobooks into the mix. This is an investment because I pay for some start-up costs, and unless I write the e-book myself, this includes hiring some writers to do the work.

Although some of those investments produce “active” income, such as services I have to provide or projects I have to run, I still prefer “passive” investments that require little or no maintenance. Why? Because if you have to work too much to profit from your capital, then it’s more of a job rather than an investment. Your income still depends on your participation and effort.

What I do is try to make the above investments as passive as possible. I may put in some initial effort, but there should be no or little maintenance involved on my part in the long run. This ensures that I’ll won’t just be trapping myself into new tasks/jobs when I start a new investment.

What should you invest in?

If you haven’t gotten the idea from my own investments, here’s the most important rule I apply:

I invest in ventures that I understand well. If I don’t know anything about a business, an investment vehicle, or an industry, either I don’t invest in it or I try to acquire above average knowledge about it.

This may sound like a limiting rule, but at least it keeps my investments in an area where I have more control. I’m less prone to being scammed and fooled because I always know more than the scammers do. Also, this means I’m not dependent on other people making these investment decisions for me. And what’s the result I got from sticking to this rule? All my investments have profited.

Of course, this rule is a personal choice. Many people I know invest in things they only have a vague understanding of, if they have any understanding of it at all. But my money is such a personal tool for me that I wouldn’t want to invest it in something that I had no above average knowledge of - such as stocks. There might come a time that I’ll be knowledgeable in such things, but until then, I’m sticking to the things I know I excel in.

How about you, what is your investment strategy? How is it working for you?

Image by Fran Priestley

Online money-making opportunities: Feb 13-20

Happy Friday, everyone :)  Below are some online job opportunities this week.

Note: I try to list legitimate job opportunities as much as possible, but some illegitimate ones might fall through the cracks.  Please use your best judgment when communicating with prospective clients, and make sure you get a signed contract before doing any work.

Blogging and Online Writing:

• Internet/ blogging/ make money online blogger ($5/post)
• Wedding style/fashion/products blogger ($30/post)
• Blogger for health care blog ($15/post)
• Web content copywriter
• Tech writer ($250-$500 for project)
• eHow seeks fiction writers ($10-$20/story)
• Blogger for NonToxin.com (about how to change the world, $15/post)

Web Design & Development:

• Professional graphic designer for customized Twitter backgrounds
• PSD to Drupal expert
• Looking for excellent web designer (ASP.Net 2.0/C#, HTML, CSS and JavaScript, can convert PSD to HTML and CSS)
• Drupal Programmer/Designer for Startup Site
• Need experienced PHP programmer to start immediately

Miscellaneous:

• Link builder
• Post retail coupons on the web
• Looking for experienced freelance business and marketing pros (paid by commission)

That’s it for this week.  Happy online job hunting!

6 Signs That You’re Living Beyond Your Means

“Live within your means” is one of the first rules of personal finance. If you think about it, this is common sense. Still, most people forget this and spend more than what they earn, getting themselves into financial trouble.

Not sure if you’re living beyond your means? Then read on to find out if you have any of the following 6 symptoms:

You don’t know how much you spend each month. If you can’t answer the question “How much are your monthly expenses?” then now’s the best time to compute it and find out. Guessing isn’t allowed. You need to know the ballpark figure for sure.

Why is this important? So you can compare it with your income and know for sure that you’re spending less than what you earn.

You’re dependent on your credit card. Whenever money’s tight, you find yourself using your credit card and just paying for those expenses after your next paycheck arrives. Usually, your credit card bill is more expensive than you thought, too. Because of that, it’s possible that you’re also afraid of opening your bill each month.

You regularly dip into your savings, if you have savings at all.Your income isn’t enough so you have to pay for some purchases with your savings.

This used to be one of my mistakes. I had “savings” but I didn’t know what they were for, I was just saving up money to be spent later. This means that whenever extra expenses came around, I would spend my savings on them whether they were needs or wants.

Your savings need to have a purpose. Are they for your emergency fund? Retirement? A new house? Without that purpose, you’ll be taking money from your savings indiscriminately.

Speaking of savings, you’re saving up less than 5% of your income on retirement or emergencies. Saving more is especially important if you want to maintain your lifestyle during times when your income is lower, you’ve lost a job, or you’re ready for retirement.

You live from paycheck to paycheck. There was a time when I would eagerly await my next paycheck - because I’d already run out of money before it arrived. This is a very stressful way to live.

You need to be confident enough about your spending habits to know that you can wait a bit longer for that next paycheck. You can only feel this way if you know for sure that you’re spending much less than what you earn.

You use new loans to pay off existing loans. It may be common for people to borrow money to pay off other loans, but it’s a clear symptom of living beyond your means. Think about it for a second - getting into more debt to pay for other debts. Not really a sign of financial health.

Have you ever experienced any of these symptoms? What have you done about them?

Image by Steve Woods

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