Which investment vehicle is best? The answer to that depends on a lot of factors. For example, what is the purpose of the investment? Is it for cashflow? Capital appreciation? Or is it a hedging investment designed to provide security? What are the levels of funds you are planning to use? How much work do you want to put into it?
Well firstly, let’s define the different investment classes so that we know what our options are.
- Real estate
- Paper
- Commodities
- Businesses
Looking at the list you may note that traditional financial planning advice would have you invest in one type of asset class (Paper) and then call you diversified. I’m not saying you wouldn’t be diversified. If you had a stock portfolio filled with great stocks that were from different sectors making money in different ways and not dependent on any one input then I guess you would be diversified. But true diversification means you are diversified across asset classes as well as within a given class.
This could look like owning some rental real estate, enjoying a well-built dividend stock portfolio, saving some gold and running your own business. This of course means you’ll have to learn about four topics and not just one. But you can do that. You can make money in all the asset classes if you learn to. You may begin by picking one that suits you and starting there. Hang around there for a while and gain some proficiency in it. Then use your cashflow from that asset class to invest into another.
Let them feed off each other and support each other. If you stay put in one asset class, you could become hugely successful in that one class. Nothing wrong with that. In that case, just be aware of the others and what they offer. If an asset class or part of an asset class is currently difficult to invest in, it means there’s another that is easy to invest in. Similarly, if one is becoming expensive and overvalued, then one of the others must be on sale. Being nimble enough to move around an asset class is one thing, but being able to move among different asset classes as you need is the realm of the truly competent investor.
