Even MORE Investment Options- and Which Are the Best?Sep 10, 2020
This is the conclusion of our great series on things you can invest in- that aren’t named “the stock market”- and even more things you can invest in. Some are awful- like cryptocurrencies, with their high risk and poor oversight- and some are wonderful across a wide swath of objectives 😎
Let’s finish up with a few more investment options-
Sounds complicated, but their premise isn’t! Futures have been around for a long time- starting with agricultural futures contracts- and have expanded over time to cover energy products, precious metals, foreign currencies, stock market indexes, and even securities! 💎
What they are: Futures are contracts where a buyer promises to purchase a commodity in the future for a specific price. The math and structure of futures is complicated, but futures contracts can actually help reduce uncertainty and provide stability in an economy 👍
Imagine a farmer who signs a contract to sell a particular amount of corn at a certain price, one year from today. He has the security to plant his corn crop, knowing with certainty that his crop will sell at a known price, at a known point in the future. The buyer knows that his price will not go up or down, whether or not the price of corn rises or falls over the next year. These certainties allow companies and individuals to make certain assumptions and business decisions over the course of time, which improves stability ⚖️
You may think this sort of contract sounds familiar; remember our discussion of options in another article? Like futures, options are structured as contracts. However, a futures contract requires the buyer to purchase the item; an options contract allows the buyer to decide at the end of the contract whether or not they want to purchase the item.
Usage: Common. These are some of the oldest investment instruments available, due to their use in agricultural markets. However, the math required is complicated- for both buyers and sellers- so companies generally invest in futures; individuals generally do not.
Potential Risk: High. Going back to the example of our farmer- in general, both parties “win”- the farmer sells his crop, the buyer has corn. Who wins most? It depends; the price of your chosen commodity goes up or down over time, just like any other equity. However, futures are considered somewhat riskier than equity investments (like stock market or mutual funds investments), because there are certain cash infusion requirements with futures trading.
Potential Reward: High. The potential upside can be quite lucrative if you have some good luck, no bad luck, or many years to invest 📈 📉
No such list like this would be complete without discussing real estate! 🏬🏭🏠🏡
What it is: You purchase a piece of real estate, with the express intent of making a profit from that purchase. You can profit in a few different ways- by renting out your real estate and earning income; by holding on to the property for long enough that its sale will net you a profit; or by making improvements to the property, and then selling it in the short term for a profit (also called “flipping”).
Usage: Uncommon. Real estate investments can be a great way to make a profit, but their use is often limited to those individuals/companies who have some amount of cash to invest.
Potential Risk: Moderate. Real property has a physical component, so even if its value drops in the short term, your asset will never disappear or be worth less than zero; and it will always recover its value over a long enough time frame 📅
Potential Reward: High. The potential upside can be quite lucrative, depending on your goals and strategy 💰
Beanie Babies, anyone? The little plushies from Ty Inc?
Yeah, me too. They were all the rage for several years in the 90s, though! 😆
What they are: Any physical item that is sought after by collectors. These items range from sports memorabilia, toys, art, home goods, vehicles, and more 🏈⚾️🚗🎻🎭🎨
Usage: Uncommon. People most often acquire collectibles for personal reasons, and not for the intent of selling them for a profit in the future.
Potential Risk: It Depends. The risk here consists of the amount you lay out for your initial purchase. If you enjoy the item and are collecting it for its own sake, that would be a low risk. If you buy certain items with the intent of making a profit- perhaps footballs signed by a popular quarterback, or antique porcelain dolls- your items may never grow in value enough to be worth an investment.
Potential Reward: It depends. The more expensive the initial investment, the more lucrative your return can be. Remember, better lucky than good! 📈 📉
Which Investments are Right For Me?
We’ve gone over quite the exhaustive list of investment options-
Stocks, Bonds, Mutual Funds, Options, and Cryptocurrencies; Bank products, Annuities, Life Insurance, and Personal Investments; and today, Futures, Real Estate, and Collectibles. Which investments are right for you? 🤔
Oh, you’re going to hate me for this answer, but I have to be honest with you:
It honestly depends on your situation and your goals 😬
I was always frustrated reading that line in books, online, etc, when I was trying to find the best financial options for myself. But now I know that it is absolutely an ethical and legal issue for financial people, so I’m happy to spell it out for anyone who feels the same frustration I did 😁
Here’s the issue: if anyone reads online, “Melissa Timberman said I should invest in XYZ if I have ABC goals”, and then you do that, and then it doesn’t work for you- I would feel terrible. Truly, gut-shatteringly terrible. I cannot imagine anyone losing their entire savings- half of it- any of it- based on advice that may or may not be relevant to their own situation. Even tiny details about your financial situation can make a product completely suitable- or unsuitable- for you! ⚖️
Your financial wellbeing is too important to me, for me to cavalierly hand out tips online, even if they are generally appropriate for some people and situations 🙂
(There are legal protections against it, too; there is a condition called “suitability” that prevents all financial people from recommending anything without knowing your objectives, goals, assets, liabilities, and environment.)
So here’s two solid pieces of advice I will give you:
Ask for different opinions. Consultations in the financial world should always be free. (If they’re not, excuse yourself from such a meeting immediately.) If your consultant assumes they will earn your business just by freeing up an hour for you… also excuse yourself immediately 😂
Go with your gut. Warren Buffet says: Invest in what you know. Each description of these different types of investments will do one of two things- it will either pique your interest, or you’ll immediately think that choice is silly or a bad fit. If it’s the first… explore that idea more! Learn more about it, ask questions, ask different opinions from people who know more than you about the idea in question (you’re plenty smart about other stuff) 😉
Ask other people questions when you don’t know something, and trust your own ideas of what’s right and wrong for you. That’s pretty good life advice, really, and it’s fantastic financial advice 😁 🌟
Now That’s Smart Money 🧐
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