Where to invest: Value appreciating assets
We are all told to invest a good portion of our income.
We keep hearing how regular investment is the key to financial freedom.
We see graphics and tables showing how compound interest can make $1000 invested in your 20s can yield 3100% returns even if assuming a modest return rate of 9% p.a.
But what no one tells you, is exactly where do you invest your money?
In this article, we cover everything you need to know about evaluating investment vehicles.
Where should I invest in?
Invest in assets whose value appreciates with time.
When you invest in an instrument, first and foremost, determine if its value increases with time.
You will probably get many such assets. Some examples would be:
- Residential real estate
- Commercial real estate
- Mutual Funds
- Bank FD
- Stock market (long term investment)
- Buying equity in startups and privately owned firms
and the list goes on and on.
However, not ALL of these instruments are created equal!
Always look at the appreciation rate for each investment vehicle. The appreciation rate is the rate at which the value of an asset increases per unit time. In the above list, for example, you would notice that the appreciation value for a savings account would be less than that of a fixed deposit, which in turn is less than that for mutual funds (in general). Therefore, if I were to ask you, where would you be most willing to put your money,
Do not invest in assets whose value decreases with time. These are assets, which, if you decide to sell off, would not give you as much value as you had paid for buying that asset.
Some examples for these assets/investments, also called deprecaing assets, are:
- Cars
- Expensive mobile phones
- Laptops
- Smartwatches and common, non-luxury wrist-watches.
- Expensive clothes and footwear
and anything else that, once bought will never again be sold at the same or a greater price.
Knowing where to invest would be ahuge first leap towards becoming financially independent.
All the best!
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