The Second “I” Is For Investing

There are lots of places to look online to tell you what investing is, but most of them will bore you to sleep, or confuse you into running away from the whole subject. Don’t sleep. Don’t run. This is the best way to make most of the money you need in your life.

This is how you get your money to work for you, and not have to work for money.

You can do this. You can get money to make money for you, so you don’t have to work. It can be done… it just can’t be explained in one simple little webpage.

What we can do is introduce you to the things you need to do to understand investing: R-RISK.

R-R is Risk/Return

Everything is a risk. Doing something, anything is risky. Doing nothing is risky too, and isn’t normally compensated with a return, which is the amount of money an investment pays, in return for our money (and our risk).

Normally, the more risk, the more return. This doesn’t mean you should make lots of risky investments to get high returns. Nor does it mean you should only make low-risk investments. We have to learn how to balance our risks… and that’s where the ISK comes in.

I is for integration

Try to invest in things that are closely aligned to your life. You don’t need to buy property in faraway lands if you never want to live there. You don’t need to try to “outperform the market” because the market doesn’t mean anything to you. You can take risks that are similar to the risks you re planning to take in your life… where you are going to live, what you are going to spend your money on, etc. An integrated risk is a reduced risk.

S is for spread…

…or diversification. We all know the phrase “don’t put all your eggs in one basket” – it’s not “put all your eggs in one incredibly safe basket”. By investing in more than one thing, other countries, asset classes, currencies, etc, the chances of all of your investments going down at the same time are reduced. Your risks have reduced, even if all the investments are individually risky, your risk can end up lower than if you stay in just one seemingly low-risk investment.

K is for knowledge

These few paragraphs are the starting point of a journey to understand how to invest well. If you can spend 8 hours a day working to make some money, you can spend some time finding out how to invest it well, so it can make some money for you.