The Three Pillars of Investment
Reading and Writing
THE THREE PILLARS OF INVESTMENT
Investment is an art, a not simple, not easy, and not safe practice that can be cataloged as an art. Like all great forms or art, investment is something that many people has misconceived, and has tried to reproduce, but has failed at itmost of the times. In order to not fail at investing, you first need to understand what its foundation is (Farmer, 2010, p. 7).
We will explain briefly, but in depth, how to understand the basics of investment. This will be accomplished just by understanding which the three pillars of investment are, and here we will know them, describe them, and learn how to invest on each of them. We will alsoknow about the very concept upon which all investors should rely on; diversifying. Our topics of interest are:
1. Knowing the three pillars.
2. The pillar of stocks and bonds.
3. The pillar of real estate.
4. The pillar of small business.
5. Diversifying for the win!
The review of the basics of investment focuses on these areas.
KNOWING THE THREE PILLARS
The whole world of propertyinvesting rests upon three totally different pillars; the pillar of stocks and bonds, the pillar of real estate, and the pillar of small business (Wikipedia, 2010, para. 1). All three have different concepts, requirements, and expectations. However, all three share the same objective; make money work for you, so you can make money out of money and not out of working for somebody else.
The Pillarof Stocks and Bonds
This is a very unpredictable world too, which can also be described as merciless for the investor. No matter who you are or what you do, if you decide to get in the world of stocks and bonds you never come aboard being certain of wining. “The world of stocks and bonds is a world of risks, but of high profits too” (Farmer, 2010, p. 109)
Stocks and bonds concepts,requirements, and expectations. To define stocks and bonds we need to manage two different concepts. This is because although this is a one single pillar, there are two ways of interacting and participating when investing here, and the first is with stocks.
“A stock (also known as an equity or a share) is a portion of the ownership of a corporation” (Mike Moffatt, n.d., para. 1) when a bond is “a debtinstrument issued for a period of more than one year with the purpose of raising capital by borrowing” (InvestorWords.com, n.d., para. 1). In other words stocks give you ownership of some of the company and bonds are just a promise to re pay your money. However, there are always some musts in order to have a correct expectation.
A few things are necessary for any investor to expect good profits.First you need to get yourself a broker. You need to be aware that nobody can ever predict how the market is going to behave, because nobody can predict the future, so don’t try to cheat the system here and diversify. Don’t put all of your eggs in the same basket. Diversifying will guarantee that if you lose somewhere you will recover and get profit elsewhere.
The Pillar of Real Estate
“RealEstate. I love it and it still exists as a career and as a viable passion” (D. Trump, personal interview, January 25, 2007). With these words we get an immediate conception of the potential and high expectations this type of investment is up to; they are immense. Basically you get land and add value to it, so you can rent and then sell at a price many times higher than the original price you paid.Requirements. One inconvenient landlords always have to face is the requirement of repairs and improvements to the property (Eldred, 2009, p. 150). Also you will need capital, and most of the times high amounts of capital or cash in order to acquire the land. You will also need time, because you can not possibly expect that you will acquire a piece of land today and that you will sell it ten...