Welcome to Part 4 of the Series! If you haven’t already. You need to check out Part 1, Part 2, and Part 3, for everything to make perfect sense. I wrote about seeing money differently for your benefit, determining your money philosophy based upon your new understanding, and establishing your (hopefully) diversified savings plan to be the foundation for your emergencies and opportunities. Now in this Installment, we cover the process of working your savings into Investments and what Investments look like very broadly. This covers alot of things lightly just to make you aware of what opportunities are out here in the world besides a job or a single hustle. Much of this will be from things I have learned directly or indirectly, but its up to YOU to find our what works best for you. So, here we go!
Synergize your Savings and Investment. Know the difference between your Reserve Capital and your Investment Capital.
Synergy is the interaction or cooperation of two or more organizations, substances, or other agents to produce a combined effect greater than the sum of their separate effects. This is the phenomena you DEFINITELY want to achieve with how money comes in and goes out in your life long term. With your savings you build the base, and with that base you flip a sizable portion into Investments. And as those returns come in, or you decide to take some money out of your investments, you firm up that base of savings you have. Your money flow needs to be a well performing cycle, of Spending, Income, Profits, Reserve, and Repeat!
Now following from the Base you create from my suggestion in Part 3, You need to make a decision of the ratio of Reserve Capital to Investment Capital you hold. Reserve Capital is just a fancy way of saying Emergency Fund. I don’t like calling it an emergency fund because of philosophical and personal psychology reasons, but it’s the money you tap into to take care of situations that are neither recurring expenses, disposable consumption, or investment capital. Its savings that you don’t touch until you absolutely have to touch. It is your most firm form of “sitting money”. For me, I like to base that amount off of 3-6 months of my living expenses. Of course the higher you make it, the more of a foundation you have, but consider you may be sacrificing time that could have been used to expand your base with well performing investments. That becomes the decision you have to make. If you are having a hard time keeping a solid base at this level , you need to work on both your Income potential and money discipline. You won’t be able to break yourself from the working and spending cycle, without some major miracle or windfall, if you cannot first be disciplined or productive enough to secure a stable Reserve Capital! Please make this happen, for you! Remember, Savings is your Foundation, but your Investments are your Machine.
Once you secure your Reserve Capital base, you are now in the position you are now saving to build your Investment Capital. This is your hard working money, that you send out to either provide Income , or to make solid returns in the form of gains, profits or appreciating equity. This is money you use to invest in yourself , or vehicles you have vetted well. Generally right now a well performing investment should outpace inflation and taxation, of which the U.S. Govt says is 2%, but shadowstats, of which I watch, says between 10% and 15% right now. You need to look for Investments that perform better than that, and there are many but you have to look, and hustle!
Investments are Primarily Speculative or Income Based. Work Both to your Advantage.
Usually , the investments that provide the biggest returns are speculative, high risk for high returns. What makes them less speculative are your understanding of how the investments work and you ability to exit quickly to capture returns. With investments, the sooner you can extract your returns from them , as gains or returns or income, the better! You are always seeking to secure your gains and make them liquid , so you can flip them again in another great opportunity. The only exception to this is if your Investment provides strong , residual income, monthly or quarterly and passively preferably. Know when to Cash Stash, Cash Flow, or Cash Out. When you find and develop a good model for you, you will know how to grow you money fast and reduce down side risks. Every Thinking Black man needs a good money machine process in their lives. With that said , here are some common investment opportunities. Next time when you are out and about, or as you are online, see if you can spot them.
Private Business or Private Equity Stake in a Small Business
This can range from mom and pop shops, smoke shops, barber shops, boutique clothing shops, liquor stores, all the way to gas stations, convenience stores, or product websites, where there is a sole owner and operator to a small staff. You really have to be smart with these opportunities, because they are make and break, you have to vet the originator, the management, the business model, the marketing and projected profit strategies. But if done right, it can become a strong, consistent profit and revenue stream for you. Make sure you study how to properly vet businesses and know the model your business investment operates from or what you establish. This is something I’m still working on myself. the great thing is there is low competition to get in these ventures, so you can take your time getting into more than other investments.
Real Estate, Buy, Flip, Hold, Apartments, Commercial.
This is a very common investment strategy globally. There’s so much information online how to play this game, but in short, You can use your money to buy, fix up and sell property for sizable profits, or you can purchase and hold the property, for residual monthly or quarterly income , from a tenant, which could be someone that stays there or a small business that occupies the space. Real estate can be capital intensive but what’s awesome about real estate is that most banks or lenders like it, and it is easier to borrow money to leverage your profit potential and returns, because most real estate is self collateralized. This is what I’m personally getting my weight up to do to create my passive income base.
Stock Market, Bonds, Forex.
Of course you can make a Shitload of money in the stock market, bond market or forex (the Foreign exchange) market, and fast. The opposite is true as well, you can lose a shit ton fast, just ask some people close to you about 2008. The Difference is your Exposure, Your Skill set, and your Exit strategy (do you see a theme here? I hope you do! Be smart!), and your ability to liquidate quickly. Most people just “set it and forget it” long term with the stock market, in their job 401k or retirement account, usually at the suggestion of some adviser that gets paid a commission up front, whether or not you make money. Again, in 2008, this hurt alot of people, usually by retirement accounts they had at work. In all honestly, I have the lowest amount of holdings in the stock market, none in the bond market and none in the forex market. However, as I transition from full time employment, my intention is to transition my Active Income (money I work for) strategy into successfully trading in one of these markets, which requires education and mentoring , so that I can be an Effective Trader. These markets are FAST and often VOLATILE markets. Buying and Holding really exposes you to high risks if your exit strategy is weak, Trading allows you to capture gains you can easily take and employ again, inside or outside of these markets, for more gains. There’s so much more I could say on this but My job is to give you something to prompt your interests. Its up to you to look deeper!
We have reached the end of part 4! I hope a picture is forming for you of how you want money to flow and grow in your life. In the next installment we will cover Insurance, financial instruments used to reduce risk of significant money loss based on the unpredictability in life. Some form s of insurance can help you make money! Stay Tuned!
Leave A Comment