There is often too much hype that attends investing advice. With people selling investment products, trading products, and various services, it is too easy to miss the investing forest for all of the investment product and service trees. Many folks would just like to find practical investments. Mind you, we are not talking about the very best return on investment, or the worst. We are not talking about investments that require giving up your day job in order to manage. When we say find practical investments we are talking about investments that give a reasonable return for invested capital and time, are easy to check out and follow, and have a low risk of loss. When you set out to find practical investments it is also important to think in terms of expenses in life as well as investments. For example, paying off credit card debt is a must before setting out to find practical investments. Also, buying your own home and paying mortgage interest that is tax deductible is an excellent way to start. In our discourse on how to find practical investments we are limiting this discussion to equities and money in the bank.
Interest bearing investments are often the most secure. These include US Treasury bills, bank CD’s, and AAA rated corporate bonds. All of these vehicles provide a slow and steady return on invested capital and allow you to sleep soundly at night. In theory you only need to roll them over at maturity to keep earning. The drawback to these investments is that they often do not keep up with inflation. However, if one purchases Treasury bills or corporate bonds when interest rates are high it is possible to sell as interest rates fall. The value of the interest bearing vehicle rises as rates fall and one can gain a nice rate of return. To find practical investments in this realm remember to keep your bank deposits at less than $100,000, the limit of Federal Deposit Insurance.
Utility Dividend Stocks
An investment vehicle that mimics the rate of return on US Treasuries and corporate bonds is a dividend stock from a utility company. These tend to be secure investments with a potential for growth and their dividends tend to track current interest rates. When you seek to find practical investments in this area make sure to do fundamental analysis on the company in question to make sure that there are no surprises.
Things That You Know about and the Learning Curve
Many years ago in the late 1970’s the “hot” investment idea for those in high tax brackets was to buy and lease out railroad cars. The idea had its day and some folks made money while others had a less profitable experience. The sad thing is that many who invested in this vehicle were physicians acting on the advice of investment advisors or friends. During this time science invented the first medicine capable of reducing the secretion of stomach acid, Tagamet. This medicine sold like hotcakes and the stock of the company that made it rose substantially. Physicians, pharmacists, nurses all saw what was happening. The best investment for many would have been to invest in the maker of Tagamet. You can commonly find practical investments in things that you know about. This gives you an advantage of over other investors and reduces the amount of homework that you need to do to make smart investment decisions. Sound investment advice from someone whom you trust can be profitable. However, find practical investments instead of complicated ones and you will worry less and sleep better at night.