A lot of times individuals come to me and say “What is the best investment?” Or they ask me a vague question such as, “Should I invest in stocks, bonds, gold, real estate, businesses, etc?” My answer, “For your particular situation, I don’t know. In order to know, I’ll have to ask you a lot more questions. I need more information.” There is no best investment. In other words, what are the financial objectives and destination.
While most people focus in trying to find the best investment, true success comes when you realize that all investments are neutral. It is neither a winner nor a loser for any one person. In fact, two different people can be set up in the exact same investment – one might come out with huge gains and the other end up broke. What must be clear from the outset is the particular situation and the long-term objectives of the investor. Only then can you get proper guidance on what investments will work for you.
“I Want to Invest in Real Estate”
Let’s look at a case in point. An individual came to me and wanted my assistance. His plan was to begin investing in real estate. When asked why he wanted to invest in real estate his answer was, “Because there are some great deals out there now.” He’d been reading about how you can pick up repossessed houses for deep discounts.
Of course that was true, but then I had to ask him again, “Why do you want to invest in real estate?” I presented the same question and he gave the same answer a few times before he realized that his answer wasn’t really a solid answer at all. Finally, he said, “I want to invest in real estate because I want to retire in five years.”
We were getting closer! My next question: “Why do you want to retire in five years?” We kept drilling down with more specific questions, it was finally revealed that he needed $3,000 a month to supplement his income so he could retire and stay home and help raise his grandson. That was, at this point in his life, his definition of a rich life.
YES! Now we could begin to map a course for him to reach his goals and objectives. The value of this interchange was that the type of real estate he had been considering would have been totally wrong for him, and if he had used it he might never have reached his objective.
This happens all the time – people hear something on the news, or read it in the newspaper and they’re ready to base their investment strategy on something that “sounds good.” It’s a backward (ineffective) approach to build an investment strategy.
Keep Asking Why
Let’s go back to the analogy of using a GPS to map your road trip. Choosing an investment program before you are clear on your objectives is like starting out in Atlanta, GA and you want to go west to San Diego, CA, but you start heading north toward Buffalo, New York because you heard on the news it was a great place to visit. It makes no sense.
The best way to map your investment strategy is to ask yourself “why” until you can’t ask it any more. That’s when you will find out the true motivation that is big enough to move you toward your desired destination.