Tue. Oct 22nd, 2019

DIY financial investing: Alternative investments

DIY financial investingThis is the next instalment in a series of DIY approaches to investing one’s own money.

diy financial investing alternative investments 1024x683 - DIY financial investing: Alternative investments

91642ee5 money 2696219 1920 1 - DIY financial investing: Alternative investments

The small town of Vryheid had it’s big annual Vintage Car Show last weekend, and I had the privilege of attending. A few Model T Fords, all still in running order, were the stars of the show, as they have been for more than a century.

These automobiles were the first to be affordable to the average middle-class person and it transformed Henry Ford into one of the richest people of all time. In fact, Henry Ford was richer than anyone alive today, if you adjust his wealth to compensate for inflation.

But then one also
has to wonder, did Henry Ford make millions of people poorer than what they
would have been?

Is a car an investment?

A car is clearly not an investment. It loses it’s value rapidly and requires expensive maintenance. If you do need to own a car, then the answer is clear: spend as little as possible on it so that you have more to invest in assets which are financial investments. Also, consider buying a second-hand car for which the yearly devaluation might be considerably less.

What about a
vintage car, you might wonder. A Model T Ford cost about $ 500 a hundred years
ago, but today you can sell it for $ 15 000. However, if you invested the $ 500
at a modest 5% interest per year, you would today have a staggering $ 65 750.
($ 500 x 1,0572 = $ 65 750.)

Einstein had good reason to say: “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

The three pillars of an investment portfolio

Alternative
investments, like vintage cars, rare coins and art very seldom outperform a
good solid investment strategy. There are lots of good research which indicate
that, as a rule, only experts do well through these kinds of investment.

The
three pillars of investing, which will render compound growth for many years,
are:

  1. Fixed interest investments
  2. Property
  3. Stocks

We have already looked at fixed interest investments.

Next week we look
at property and whether one should buy or rent a home.

Leave a Reply

Your email address will not be published. Required fields are marked *