3 golden rules of investment and Warren Buffett’s No. 1 investment rule
3 golden rules of investments and find out what Warren Buffett thinks is your greatest asset and what you should invest in.
People often ask me whether or not they should be investing in property, shares, gold and silver or crypto currencies, such as Bitcoins.
My answer is always the same. Do you understand property, shares or crypto currencies? If not, why would you invest in something you don’t understand? Strange thing is, many people do invest their savings into things they don’t understand!
This brings me onto my first rule of investment.
- Invest in things you understand.
I understand property, I understand stocks and shares as I do pensions and unit trust. I do not fully understand crypto currencies.
- My second rule is to invest into real assets.
Assets can be bricks and mortar physical assets, such as property or gold and silver. Assets can also be a share in a company or an online assets such as website or a database. I wouldn’t class a currency as an asset in the same way as a property, especially something like a bitcoin.
Many people do trade in currencies or buy them to hedge against currency movements. I have bought currencies, such as the dollar, when they are cheap against the pound because I know that I’ll need them at some stage for holidays.
Assets such as property and shares in traded companies usually offer an income or dividend as well as the opportunity of capital growth in the long term. Other assets, for instance gold or silver held in its natural state do not offer an income, although gold mining company shares do.
My personal favourite is property, as it is a tangible asset and I can see in touch! I can also borrow money, or use leverage, to buy an investment property.
Over the years, I have enjoyed rental income as well as capital growth, although there is no guarantee of either in the future.
The downside of property is that it is not a purely passive investment and is not as liquid as stocks and shares. It can take many months to sell a property, unlike a traded share which can be sold in minutes.
- My third rule is to assess the risks and potential rewards involved in a particular investment and then make an informed decision.
Don’t know the risks or potential rewards, upsides and downsides? Don’t invest!
Warren Buffett said that you are your greatest asset and your greatest investment is the investment you make in yourself. This means investing in your education and personal development or in a business.
If you would like information on a free property investment taster course, email me at Charles@CharlesKelly.net
As always, money tips daily is not giving you financial advice and you should seek professional advice from an independent financial advisor.
Check out my Podcast episode “My 3 Golden Rules Of Investment” from Money Tips Daily by Charles Kelly, former IFA and author of Yes, Money Can Buy You Happiness. on Anchor.