by Jet Villamor
Last week I ended up with the question, what are the different ways in going about investing? Paraphrasing said question in the light of our little discussion it would be – How are we going to make our money work for us?
Let me just put this very clearly now. My objective here is not to convince anyone that one investment vehicle is better than another. What I am trying to do here is for us to realize that the method of investment at this very early stage of our learning is irrelevant. My main objective is for us to learn to put our money to work in whatever way we can for it to earn an extra additional income for us. This is by far a very simple idea but one of the most important concepts that we should take to heart.
As I’ve mentioned before, investment is a word all too familiar to us. We’ve heard it being used practically anywhere. These would ordinarily mean putting your money in bonds, stocks, treasury notes, life insurance variable link product, mutual funds, real estate and even starting to put up your business. What I have just mentioned are those that we commonly refer to as “investment vehicles” – these are simply the means for us to be able to put to work our money for us to be able to realize some sort of a profit either for the short term, medium term or long term. These investment vehicles that we have just mentioned are not perfect. Each of these may have their own merits as well as weaknesses, which we may be able to tackle as we move forward and learn our fair share of the basics of investing.
When it is good to know what investing is, it might as well help us really understand what investing is really all about if we will try to discuss it by what investing is NOT. Investing is not gambling. Gambling is putting money at risk by betting on an uncertain outcome with the hope that you might win money. (investopedia.com)
Some people maybe all too critical about the concept of investing, they may even argue that investing and gambling is all the same. It is not. Somehow what contributes to the misconception on why people think of investing as like gambling is primarily on the use of the investment vehicles. I have a few acquaintances who are new to the ‘investment world’ the only thing that propels them to buy a stock is through a hot tip coming from one of our common friend who regularly plays at the stock market – when this is the way you do investment this is more of a gambling than investing.
The real essence of a true investment is when you only commit your money or set aside your capital for a certain venture when there is a very realistic probability of gain – after having conducted a very methodical, painstaking analysis of the business proposition that you are about to enter into.
Investment is not simply throwing away your money at any business opportunity available being offered. Investment is not simply putting your money to work and wait by the wayside and pray that the lord of luck will move heaven and earth to give you the desired outcome which is a profit.
When you enter into the world of investment you will always hear the word, RISKS – because there will always be and NO GUARANTEES – because there never is. But one thing is for sure, investing is not only for the ‘lucky one’s’. The success of an investment is a result of an educated, well informed decision that one individual has to make taking into consideration his current financial situation, financial goal and time horizon.
(For questions, comments, suggestions and reactions email @ jvvillamor@insular.com.ph)
