On money velocity
The most important factor is before investing, investigate first.
This coming May, our Pambansang Kamao will be facing the toughest test of his career when he meets Mr. Moneyman, Floyd Mayweather Jr., in the fight to determine who is the real pound-for-pound fighter in the world. His opponent is so wily in using his shoulder successfully to defend his face againt hits that the only antidote by Pacman has to use has to be his speed. Speed kills, and it will spell the difference between victory and defeat. It must be remembered that in the 1980s, Sugar Ray Leonard used the same speed in masterfully frustrating and defeating Marvelous Marvin Hagler.
Speed will be effective, especially if combined with skill. However, if the speed is used recklessly, disaster is just around the corner. It must be noted that Pacquiao was knocked out cold by a lucky punch from Marquez because of a split-second recklessness during their encounter. As the saying goes, “Haste makes waste.”
In driving to our destination, the faster the car, the earlier we arrive at our destination, even if traffic is heavy and a given part of our everyday life. Just make sure that you drive carefully, so that you do not meet a road accident.
In our personal finance, speed counts a lot,too. As Robert Kiyosaki said, we need to increase the velocity of our money if we want to grow it ahead of inflation.
A lot of people are very complacent in keeping their money in the bank. They might not be aware that the interest earned is way below the inflation rate. By keeping money in the bank, it is as if a person is on a 50-kilometer highway, but driving on first gear only.
In order to meet life’s goals, one should learn to grow one’s money by studying the different instruments and put into action what was learned. One tested strategy is to diversify the fund into different instruments with the corresponding goal and timeline.
Here are some ways to increase the velocity of your money:
1. Invest in your financial education. By putting some money into learning, you can be exposed to information on how to grow your money. I am a product of education. I attended both paid and free seminars to learn more about money management. Yes, education may be expensive but ignorance is even more expensive.
2. Invest in paper assets. These are investment instruments, like mutual funds and stocks. Here, you give your money to the investment fund manager in exchange for documents pertaining to your investment. Although the return is not guaranteed, these are historically better than the average bank product. Another method is via insurance, where an individual can make the next generation rich by just paying a small premium for a huge coverage.
3. Invest in real estate. Real estate, if properly used, can help provide passive income higher than that of a mere bank product. Not only can one earn via rental but also via flipping of the property.
4. Invest in a business. Business is one of the best ways to get the highest return. Just make sure that you make a good feasibility study before jumping in. It is also a good idea to partner with one who has the same passion as you have.
The most important factor is before investing, investigate first.
Edmund Lao is a Registered Financial Planner of RFP Philippines. A sales engineer by profession, he is an advocate of financial planning.
Source: http://www.businessmirror.com.ph/on-money-velocity/
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