Investing for the Long Run
All too often people want to make a quick buck. They don’t think about the fact that compound interest is incredibly powerful and that annual returns of say 9% a year, if they go on year after year, will double your money in about 8 years. Instead they focus on quicker returns and end up falling prey to con artists and scams.
Instead of chasing after the quick money, you should be thinking of making slow money. Slow money is cautious money and it is not impatient. One asset class that offers reasonable returns is property. Now if done properly it won’t shoot the lights out. But in truth you shouldn’t be thinking about shooting the lights out. Go for very high return investments and you run will invariable run higher risks. So look at low risk options that provide a reasonably predictable income stream over many years. One option is residential investing. In Britain they call this buy to let. In essence it means buying a house or a flat and then leasing it out. Many people lost a fortune when the property bubble burst trying to chase super-high returns in buy to let. They borrowed too much and when buy to let mortgage rates shot up they got completely wiped out, losing their investment properties and often their own homes too.
But the patient investor will wait until property valuations look reasonable (and right now they are still a bit rich) and then invest with a reasonable margin of safety. That way if interest rates go up, or property prices fall, then they won’t be at risk and can just ride out the downturn. The trick here really is to try to find investments that you can tuck away and still sleep soundly at night without having to worry about events that are not in your control causing you huge losses. If you focus on properties that can give a decent rental yield over time, instead of ones that you hope will rise in value, then you stand a good chance of earning reasonable returns.
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