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What is REALLY an investment?

What is REALLY an investment?

| May 04, 2018

What is REALLY an investment?

One of the best investors / financial authors, Benjamin Graham stated it perfectly:

“An investment operation is one which, upon thorough analysis promises safety of principal and adequate return. Operations not meeting these requirements are speculative”

There are three ways that you can INVEST your money.

1. Invest in yourself
2. Invest in the markets or private businesses
3. Invest in real estate

Everything else is gambling.

Invest in yourself

One of the most valuable ways to invest is the most often overlooked - Invest in yourself.

You may ask, “How can I Invest in myself”?

Easy! – You either spend time or money improving your life.

One of the most valuable things that you can do to improve your financial life is to learn something new – EVERY DAY.

· You can read a finance book (or any non-fiction book).
· You can read a financial blog (or any educational blog).
· Educate yourself on your spending habits (talk to us about how)

Warren Buffett, probably the best investor of all time, spends 8-10 hours a day reading and learning. He swears by it. In fact, many of the most successful people throughout history credit their accomplishments with their desire to learn and grow.

And so, should you!

How can I invest money into myself?

You can invest money in your education, time efficiency, networking, or your appearance.

Invest in Education

  • You can earn a higher degree
    • Studies have shown that the higher education you achieve, the higher salary you can command. Why not keep boosting your credentials?
  • You can earn more industry certifications
  • You can sign up for a class to learn a new language
  • You can get any number of skills through online courses.
  • You can learn social media marketing, software development, photography, Etc.

If you put time/money into your education you can reap long term benefits as you deepen your skills.

You will be more valuable to your employer (potentially higher salary!).

If you own your own business, you will be much more in tune to opportunities to drive your business to the next level.

Investing in time efficiency

Say, you make $250,000 a year. That equals about $4,800 per week. If you’re working a standard 40-hour week then your time is worth about $120 an hour. If you are spending an hour of your time doing a task that you could pay somebody else to do $10 an hour, then why are you doing it?

This is an important question to ask yourself. Many of my clients take 10 hours to try to file their taxes when they could delegate that for less than $500.

They know spending that time on their job or their business would make them more money. Yet, this concept is often hard for people to adjust to.

Here’s the simple math: if your time is better spent earning money than completing certain tasks - don't do them. These tasks you should delegate.

Here are some ideas to get you started:

  • Grocery shopping
  • Cleaning
  • Taxes
  • Vacation planning
  • Cooking
  • Menial work tasks
  • Technology to save time (to-do lists, auto-responders, etc.)


What aspects of your life could you delegate?

Technology has made it simple to multiply yourself and be more productive. Allowing you to earn more money!

Invest in networking

Whether you’re a business owner or an employee networking can have huge benefits to your career. Spending your time and money on networking can have bountiful returns.

Here’s how:

  • Join a networking group (Toastmasters, Chamber of Commerce, BNI, or others)
  • Invite a LinkedIn connection to coffee or lunch (mentor, prospect, informational interview, etc.)
  • Host networking events for your business

Invest your time and money into meeting new people. Expand your horizons. You will start to see doors open to you.

Invest in your appearance

All right, you may have seen that headline and blanked out. Is my financial advisor telling me to invest in my wardrobe?

I know Investing in your appearance, seems shallow. I Know. I know.

Yet, investing in your appearance does yield great benefits.

Your whole life you have heard the clichés: “dress to impress”, “dress for the job you want not the one you have”, or “better to be overdressed than underdressed”.

Well, I’m here to tell you, these clichés are true!

Many studies have shown that you get judged by how you look.

Your appearance impacts your career, your salary, and your network. We as humans are visual creatures. Our brains determine our opinions of people by subtleties such as how they look.

People especially judge your appearance during first impressions. Meeting a client for the first time, an interview, or going out networking? – DRESS TO IMPRESS!

Wearing quality clothes can help you look more professional and earn trust quicker.

Invest in clothes that you wouldn't blush if you bumped into your boss or a client while out on a Saturday.

You may get the added benefit of long term savings as well! One $100 shirt that’s better made may last longer than four $50 shirts. Typically, it’s better to own fewer quality clothes than more cheap clothes.

1. Investing in yourself
2. Investing in the markets or private businesses
3. Investing in real estate

Everything else is GAMBLING.

Invest in the markets

Here you need to be a little careful. Why - you ask?
Not all investments in the markets are created equal.
In the markets, you can invest in assets and asset classes that can yield significant returns over the long run. But there is a lot of speculation in the markets as well. You want to be an investor, not a gambler.
First off, here are some of the broad markets we can invest in:

  • Stocks (Domestic or Foreign)
  • Bonds (Government, Corporate, domestic, foreign, etc.)
  • Commodities (gold, silver, oil, etc.)

So how do we know if we are investing or speculating in the markets?

Let’s review the quote that I showed in the beginning:
“An investment operation is one which, upon thorough analysis promises safety of principal and adequate return. Operations not meeting these requirements are speculative”


You need to recognize the risks of your investments. Take steps to mitigate your risks. And understand your likelihood of making money before you shell out your hard-earned dollars. Obviously, there are zero guarantees when you invest. But you can give yourself a better chance of success.

Invest in Private Businesses

Private businesses are a HUGE part of the US economy. They can also be a great way to build wealth for individuals.

You can create your own small business:

  • Start a coffee shop
  • Own a restaurant
  • Build an Ecommerce business


There are MILLIONS of different businesses you can build. But make sure it’s one you are going to be passionate about building.

Obviously, building a business takes a TON of work. You must create a business plan, do market research, build websites, do accounting…etc. In addition, you need to familiarize yourself with the risks associated with your chosen business.

This option is not for the faint of heart. That said, many of the wealthiest Americans own their own businesses. So, it might be worth exploring!

Don’t want to do that work? – Piggy back off someone who does!

Small business owners are often looking for investors (especially when starting out).

If you see a private business you believe in, ask the owner if they’re looking for investors.

Never hurts to ask!

If they are, great! Make sure to still do your due diligence on the company to make sure it’s a good investment.

  1. Invest in yourself
  2. Investing in the markets or private businesses
  3. Invest in Real Estate

Everything else is gambling.

Invest in Real Estate

Real Estate is one of the most common investments. Real estate is also one of the most misused/ misunderstood investments.

Imagine this:

You buy your dream home. It has all the signs of being a great buy – a great investment!

The home is close to top notch schools, it’s in a great neighborhood, the houses nearby are growing in value, it’s a thriving community, etc.

So, you pull the trigger. You buy it for $300,000, and you move in shortly after. You live there for a beautiful 30 years. You raise two amazing kids there. Fast forward. That house is now not only paid off and worth $1.5 million, but it’s also packed with 30 years’ worth of amazing memories. You wish to live the rest of your days retired in that house, surrounded by those memories.

But wait. You’re ready to retire.

You have paid off your house – it’s been a great investment. But you have paid it off at the sacrifice of your other retirement accounts. Now your house is the majority of your net worth.

You come to a realization. You must sell your house or keep working (maybe for the rest of your life).  You become torn because you don’t want to sell your dream home for money to retire.

Does this story sound familiar?

I am sure it does. This scenario happens to a majority of Americans that purchase their homes.

They believe they are making a winning investment by putting their savings into their home. But they forget that they must SELL their home to get the money from that investment.

If you want to invest in Real Estate, you have to examine it as you would any other investment.

Some common mistakes with Real Estate:

  1. Buying more than you can afford
  2. Thinking it’s an investment, but not being willing to sell
  3. Not doing the math (can you become wealthier investing your money elsewhere?)
  4. Not holding the property long enough


How can you invest in Real Estate?

  • Buy for appreciation. Buy a house or property that you believe will go up in value, but you have to know the numbers. How much will you spend on repairs before selling? How much will you spend on mortgage interest? Etc. If you invest in property for appreciation, remember, you have to be willing to sell it to make money!
  • Buy and Rent Property. Buy a property (home or commercial) to rent out to tenants in exchange for monthly cash flow. Again - do your math. How much will you need to charge for rent to cover your expenses and make money? With Rental property, you can get both cash flow and appreciation if the value of your property goes up.
  • Consider whether a publicly traded real estate investment trust (REIT) might be appropriate for you.  A real estate investment trust is a company that buys, develops, manages, and/or sells real estate such as skyscrapers, shopping malls, apartment complexes, office buildings, and housing developments. Rather than investing directly, investors in REITs put their money into a professionally managed portfolio of real estate. REITs make money from rental income, profits from the sale of the property, and other services provided to tenants.
    1. Before investing in a non-traded REIT, carefully consider its investment objectives, risks, fees, and expenses, which are contained in the prospectus available from the REIT. Read it carefully before investing. Special risks associated with a REIT and its underlying assets should be identified in the prospectus. Keep in mind that a specific offering may not meet its stated investment objectives.
    2. REITs are also subject to the risks associated with the general real estate market, including possible declines in the value of real estate, changes in overall economic conditions, and the potential lack of availability of mortgage funds.
    3. In addition to the general real estate risks mentioned above, other factors can pose a threat to individual real estate sectors. For example, recessions can impact REITs in the retail sector, while health-care reforms may have an effect on REITs that invest in hospitals and assisted-living facilities.
    4. REITs are also subject to risks associated with the underlying REIT properties. These risks include increases in property taxes, changes in zoning laws, changes in neighborhood values, and the possibility of a natural disaster. These risks may be more significant to the extent that the REIT's investments are concentrated in a particular geographic region. Further, loss of management credibility can be devastating to any REIT.


What are some benefits of Real Estate Investing?

  • Cash Flow
  • Appreciation
  • Leverage (you can buy a house with 20% down)
  • Automated Investing (Paying off a mortgage is like a forced savings account)
  • Tax Benefits (Real Estate can offer ways to improve your taxes)
  • Tangible (an investment you can see, touch, and use)

There are tons of considerations to make when investing. I can help guide you through the process.

Do you want to explore making a certain investment? Schedule some time with me to look at options that make sense for your situation.

I am thrilled to help you!


Copyright 2018 Odyssey Wealth Design. Odyssey Wealth Design provides financial planning and wealth management to clients in Orange County, Irvine, Newport Beach, and around the country.