The idea of investment surrounds the concept of safety – or banking something, whatever it is, for the future. This could be skills – you know – like education, because education is investing your time now for future gain so that you can pick up skills that can help you build your life, and your career.
When we come to investing money, we want the idea of safety to be involved at all times, but frankly – it’s a lie. There are safe investments, like there are safe bets – and a safe investment is always the better choice over a safe bet, but risk will always be involved when we put money on the table – no matter if it’s the negotiation table or the roulette wheel; it’s just different amounts of risks at all times throughout.
The similarities between investing and gambling surround the involvement of risk. That’s not to say that investing is a gamble though, because it’s not. It really isn’t. People who don’t know much about investing are more inclined to compare an investment, into anything, with gambling within a casino. There is the matter of choice as well – as an investor you can choose what you invest your cash into, and as a gambler, you wait for good odds that are worthy of your stake at the table. You can’t manage your risk much in gambling, as what you put will stand a chance of losing and regardless of the odds – chances are almost 50/50 win or lose. Investments are safer, because you can diversify and employ strategies in the area of risk management to help spread the risk of a loss out and minimize the potential loss of cash. In gambling, you can obviously assess risk, but whatever you put up stands a chance of a loss. Big time gamblers have similar mental skills to portfolio managers and can risk manage well. In both gambling and investment, you want to restrict risks and keep profits high. Either way, if you want big returns, your stake needs to be bigger – which comes with more risk.
The big difference? Gambling is short term. It’s a big win or loss quick at high risk. Investment is potentially a payout for life. Investment isn’t like gambling at all, while it might seem a gamble, it’s not.
So, is there ever a safe investment? The simple answer is no, there is not. Some investments are safer than others though. What investments can you make? Plenty. You can buy and trade stocks to sell at high prices to make you profits; you can invest in companies waiting for dividends. You can invest in real estate, and you can invest in businesses. There is a lot of choices, and that’s good when it comes to risk management as you can spread your wealth across a number of investments for safety’s sake. A lot of choice? It’s safe.
The problem with investments is the fluid nature of companies. Trading stocks is something that requires your full-time attention, and this is why people trade with a manager, because it needs constant attention. Prices change minute by minute. Expecting dividends from a company is usually something safe, but you need the company to make a profit to get anything at all, and there’s nothing to say that the company you have invested won’t close doors all of a sudden, leaving you, in some cases, penniless in relative terms to the investment you have just lost. This isn’t to say that investing in companies doesn’t work out, because it does – it’s just that there is risk involved.
The safest investment, for many, is within the tangible and real properties of the housing and commercial market. Buying properties and renting them out means you can get a return on your investment and an asset to hold onto. Why is it safe? Because if you’re always in a position to pay your part of the bargain (the mortgage and other costs), you’ll not lose your investment. The value can dip – and dip hard if the market crashes but you only truly make a loss if you sell at a low price. If you’re patient, you’ll survive and be ok in the end. The big issue is if you sell at that low price and make a loss – and you might well do if there’s a huge crash. Rent is another issue and finding tenants can be difficult, meaning you can’t expect any kind of return or payments until tenants are settled. This could mean you’re the sole payer, and the mortgage is coming 100% out of your pocket. This is not the situation you’d have imagined, and it can be tough. There are options though and property agents can find tenants, for a fee. With real estate, as long as you’re the sole owner, you’ve got options. Problems emerge when you’ve invested in something else entirely.It’s best to work with responsible names in the industry like Pivotal Homes if you’re feeling a bit worried about investing into real estate. Working with someone with a proven track record can be a big help. Doing it on your own is a lot of work. For example, if you’re investing in real estate, you suddenly become a landlord and responsible for the happiness of your tenants amongst other things. You will have to spend a lot of time working on the property and ensuring it’s in good condition and up to scratch. You could do this yourself or work with property managers who will handle it and bill you. Working with others makes life a lot easier.
No investment isn’t hard work unless you put your cash in the hands of someone else, like a fund. To make any investment a success, you need to apply a lot of hard work to the process. You’ll need to spend hours and hours researching a potential investment to cut your risks; you’ll need to work and craft your investment. No investment is truly safe, but you can work hard to make it just a little bit safer for you.