Integrative Investing

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The Middle Path to Investing

If you played around with the compound interest calculator in my last article, you’ll know that the “estimated interest rate” is an unknown but has a huge impact on the outcome. Based on today’s interest rates the hope of growing wealth is dreadful. Your Savings Account may not be paying you enough interest to cover the fees that bank charges you. This is why we turn to the stock market, real estate and entrepreneurship - to try and get a higher rate of return for our hard earned savings.

If you own your own business (maybe it’s a side business) and you are reinvesting your profit back into the business can stop reading here....if you are not reinvesting then start tomorrow!

If you are a 9 to 5er or more likely 7 to 7er these days, how do you get a higher rate of return on your savings.

A few options -

1 - Invest in capitalism - if you believe that businesses will continue to produce products and services that we will all continue to purchase, then buy an index fund with the savings you won’t need in the next few years. Despite a bump in the road every now and again the biggest companies will continue to make money. Be a shareholder of all those companies and share their profit. If you don’t believe that goods will continue to be produced and purchased then the value of your money won’t be worth much anyway. Most major banks have good DIY options to help you into a low cost solution and there are plenty of independent and credible robo advisors that make investing easy and accessible.

2 - If you want to be a little more active, you can buy shares of specific companies. Think about all the products you use each day. Your car, cell phone, food, airlines, gas stations, stores, banks, social media etc. Which of those companies offer the best service, the fairest pricing, the highest quality products. After narrowing down the list do some basic reading on the internet about the company’s financial soundness. Are they continually profitable? Buying a basket of companies you believe in is likely to be a sound long term investment strategy.

3 - You can also hire a financial adviser to do this work for you, but make sure you understand what the fees will be. If an adviser quotes you in terms of percentage of assets make sure you convert that into dollars. How many dollars will you pay that adviser for one year and ten years. Seeing the fees in terms of dollars out of your pocket will help you make a more informed decision. And remember, financial advisers are not going to make you rich, we are just going be a concierge to the financial services industry and hopefully a personal finance coach. As for the management of your assets… if history is any indication the best rate of return we might get for you is about 8% per year over the long term

4 - Real Estate can also be a good way to invest but do the research, and consider all the costs and tax benefits. Interest, taxes, HOA fees, general repairs can often eat away your profit or your income if you rent the property.

When making Investment decisions, whether its picking a stock, an adviser or simply deciding whether to invest at all...try to notice where you are on the spectrum between dread and hope. A little dread keeps you on your toes and too much hope may make you complacent. Take the middle path, do your research, know well what or who you are investing in. Try not to invest and hope for the best, and don’t do nothing out of fear. These are your hard earned dollars and your well deserved future at stake!

P.S. “Over the 15-year period ending Dec. 2016, 92.15% of large-cap, 95.4% of mid-cap, and 93.21% of small-cap managers trailed their respective benchmarks, as reported by this recent study