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Wednesday, April 4, 2012

What Makes a Good Investment?

Spend even a couple minutes reading personal finance books or blogs and you will come across a ton of mentions of 'investments' of all shapes and sizes, and hear all sorts of purchases and activities referred to as investments. So what is an investment, really? And what makes a good investment?

The dictionary definition of invest is:
to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value

So a stock can be an investment. Or a rental property. Even buying artwork or antiques counts as an investment. The problem with today's standard financial advice is to invest almost entirely in the category of "appreciation in value" , as opposed to something that actually produces regular income. I have never understood why I would want to own part of a company and not get a share of the profits. Which is what most stock ownership is like today. The buyers are literally only buying because they think (hope) that somebody else will buy that share from them later at a higher price. But they get nothing in the meantime. That is why Dividend investing is much more appealing to me, as is rental properties, and other investments that produce actual income.  

I am just getting started learning the ins and outs of dividend investing, so if you want more info on the subject check out Dividend Mantra, he's got some great info on the subject and always posts the changes to his personal portfolio. 

- The Money Monk

1 comment:

  1. Thanks for the mention!

    I agree with you. I don't have any interest investing in something that can't somehow produce income (gold quickly comes to mind). If I was interested in being a landlord now is an excellent time to go buy some cheap rental properties and get to work. I'm just not inclined.

    Best wishes!