Investment Planning for 2020

Investment Planning for 2020

Three key questions to ask when building your investment strategy

As I’ve travelled and spoken around the world, one of the most encouraging things has been meeting thousands of women who are ready to begin their investment journey.

It’s exciting to me to think of how the world of money and investing are shifting from something the man took care of, to something women want to own themselves. And it’s fulfilling to know that I’ve been a part of helping women take control of their financial futures.

One thing I notice, however, is that women can tend to overthink things. When it comes time to make a plan for investing, we can make it far more complicated than it needs to be. This is natural. Whenever we’re facing something new and intimidating, we want to try and control everything to feel secure, rather than simply move forward with what we know.

So, I like to give women three simple questions to ask themselves that will help them get started on their investment planning journey. If you ask yourself these three questions, you’ll be light years ahead of other investors.

  1. What will my primary investment vehicle be?

    When it comes to investment planning, I’ve learned that I’m more successful if I focus most of my time and energy on one type of investment. The four main types of investments are: real estate, paper assets, businesses, and commodities. Let’s explore each one:

    • Business

      Are you considering starting a business?

      Then in order to get started, you can either use your own money, raise money from private individuals, or borrow money from a traditional lender.

      Of course, he purpose of the money you invest (no matter where it comes from), is to generate a return on investment (known as ROI). This ROI will go back to you, the business, and your investors and/or lender.

      On the other hand, you can choose to invest in other people’s businesses. Let’s say a friend comes to you seeking an investment in his/her business idea or gives you a hot tip on an investment they are making in someone else’s business. After you do your research — on the project/business, its partners, the financing, and the management team — you may decide to invest in this private business or company. Congratulations! You’re a business investor.

    • Real estate

      You already probably know that this investment class is my very favorite.

      There are two main reasons to invest in real estate: for cash flow from rental properties and for capital gains when you buy and sell (flip) properties.

      I invest primarily in rental real estate because cash flow has created my financial independence. You’ll need to decide which model works best for your financial goals and lifestyle. Now, real estate investing comes in many shapes and sizes: single family, duplex, triplex, apartment buildings, office buildings, retail strip malls and shopping centers, and industrial properties such as warehouses, hotels and mobile-home parks. If this sounds intriguing to you, don’t miss these three tips on starting small with investments.

      Now, just like starting your own business, you have options for funding your real estate investments. Check out these six ways to find money for your investments.

    • Paper assets

      From stocks and bonds to mutual funds and retirement products, paper assets are typically capital-gains investments (versus cash flow). You can also invest in stock options, stock futures, foreign exchange, REITs (real estate investment trusts) and EFTs (exchange-traded funds). Once you learn the language of paper assets , you can jump right into investing.

    • Commodities

      The final asset class is commodities — metals such as gold, silver, and copper; food such as grains, corn, coffee, and sugar; and raw materials such as oil, gas, and cotton. The price of commodities is typically driven by supply and demand. For instance, if there is a bumper year of corn, then prices are low since the supply of corn is high. If, on the other hand, there is a shortage of corn due to a drought and unfavorable weather conditions, then the price of corn will be high. You can buy commodities such as gold and silver at your local precious-metals dealer. Like paper assets, commodities are generally a capital-gains (or loss) asset instead of cash flow situation.

  2. What is the best plan for investment?

    Within each aforementioned investment class, there are multitudes of investment types you could learn about.

    For example, if you invest in stocks, what types of stocks are you going to focus on? What are you going to become an expert in?

    For me, if I went into tech stocks, I’d fail miserably because I have no interest in them and I know next to nothing about technology. If I chose to go into stocks, I might put most of my attention into real estate stocks since that’s the industry that most excites me.

    Conversely, if you chose real estate as your investment of choice, there are single-family homes, apartment buildings, office buildings, shopping malls, and more that you could focus on.

    So when people ask me, “What is the best plan for investment?” I always tell them to simply pick one thing that you can be an expert on and focus on that. Once you’re comfortable with that investment, choose what you want to focus on next. So, your immediate goal should be to study up on each class, find which one excites you most, and pour your energy and passion into it for the foreseeable future. There’s quite a bit of terminology to learn and industry details to familiarize yourself with before taking action and diving into the daily/quarterly/annual tasks that need to be taken care of to ensure long-term success.

  3. What is my time frame for accomplishing my goal?

    It’s one thing to pick a horse; it’s another to financially bet on it. Establishing goals and placing the constraint of a time frame on them will help you to take action on your investment planning process.

    After all, one of the biggest obstacles in becoming an entrepreneur is fear. If you find that you keep searching for the right opportunity but just can’t find the perfect deal, that’s fear getting in the way. An aversion to risk keeps you in constant analysis and research (this is commonly referred to as analysis paralysis). When this happens, you may end up doing nothing. Don’t let fear or perfection paralyze you.

    Along the way, you’ll have some successes and some failures. Failures may sound scary, but they are actually necessary. If you’re not making mistakes, you probably aren’t taking enough risks. Often times in business (and in life) you have to embrace failure because that’s where the learning takes place.

    I know this just as well as any businessperson — I’ve had my share of embarrassing and heartbreaking setbacks: broke, homeless, lawsuits, bad partners, people stealing from me, mistakes that cost me millions of dollars. And don’t forget the public humiliation that accompanied some of those. But do you know what? I’m still standing! Every time I face a failure, I remind myself, “This too shall pass.” And it always does.

    In my mind, the only true failure would be if I failed to take a step back and ask myself, “What do I need to learn from this lesson?” The answer may not always be immediately clear, so give yourself a little time to make heads or tails of the situation — because if you don’t, you’re doomed to repeat that same mistake over and over again.

    And all the while, continue to educate yourself, adjust your direction, and move forward with your investment planning process. All you have to do is take some action to get started. It’s really that simple!

Original publish date: November 20, 2014