wearmanyhats

We took a trip the other day and my oldest asked me about the difference between saving and investing.  Saving, I explained is something all people need to do.  But in order to retire and perhaps in order to get ahead, investing is something that can provide an excellent return and is essential to beat inflation.  So how to do that, especially in bad times?

Financial experts feel that diversification is required, and to some extent, that is true.  But investments need to be determined by several factors. 

 Number one: what can you live with?  This especially struck me when my sister-in-law was put in charge of her mother’s holdings.  My brother set her up with some high returning investments.  But she lost so much sleep worrying about losing the money that she finally got up one morning and put the whole portfolio into government bonds.  For her it was a peace of mind factor. 

Number Two:  How many years before you must have it.  If you have time to recover from the downturn in the market-say, ten to twenty years, then having it in the stock market is fine. But if you need that money, then you must have the majority in government bonds or money markets that are based on government bonds.  Only if gold or silver is at a low should you be invested in those kinds of funds.

So what else can you put your money into? Well, during regular times, if you are careful and don’t mind the hassles, investing in rentals will make you rich.  If you aren’t into that kind of thing, there are always mutual funds or stocks that you like and have researched.  But these times are not usual.  These times are bad and soon inflation will rear its ugly head.  How do you deal with that? 

One way is to buy now before the prices increase even more, so that you can consume it later.  There are many books and articles available on the net for those folks who wish to stock up on non-perishables.  This includes not only canned good, and beans and rice, but also toilet paper, razer blades and light bulbs.  Start today and commit a certain amount of your income to building up your necessities.  It will pay off if we ever see inflation in the triple digits.  It’s not a case of if, but when it will happen.

Gold and silver are excellent for bad times.  People have a tendancy to flock to them whenever inflation is running high.  Usually some aspect of real estate is a bargain at that time, so it’s a great time to invest.  Right now single family homes are on sale.  The easiest to buy and rent are condos and they often fall the fastest to the basement during bad times. They usually soar during times of recovery.

If you have a fair amount of money that you don’t need for a while and a knowledgeable background in collectibles, times of inflation are a great time to find bargains.  People who are cash strapped will part with signed paintings, signed baseballs, antiques, rare watches and the like for much less than what those items would have commanded during good times.  Be sure you are quite knowledgeable in what you are buying; don’t take a salesman’s word for it.

Businesses are something that many people like to invest in during both good times and bad because of the tax benefits.  But investing in a pawnshop during bad times and a restaurant in good times is far more sensible that the reverse.  You have to have a service or product that is appropriate for the time period in which you are operating your business.  The internet has made it possible to sell more products worldwide like never before, so any new business model should keep that powerful tool in mind.  Investing in a new business during the upcoming recession or inflationary period should be a step taken with great caution.  Be sensible and don’t invest money you can not lose.

If your life has become seriously compromised by the decline of the stock market, you may have to investigate how you are going to live in the next several years.  There are a myriad of good financial advisors out there who can give you advice on how to cut costs, shop more wisely, and deal with the stress of financial hardship.  It seems to be a good investment if you can educate yourself in these things.  If you have fallen into a trap of big bills, ask the Consumer Credit Counseling to help you get a handle on your exxpenses.  If you want to read up on this issue, check out books at the library for free or go to the used book store to buy them.

And keep tuning in here for tips and ideas that are often outside the box.  That’s what I try to do.

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