Here are the 3 key questions you should answer when you create your investment strategy:
1. What is your primary investment vehicle?
Start to focus on one type of investment. The 4 main types of investments are:
a) Real Estate
There are two main reasons to invest in real estate: for cash flow from rental properties and for capital gains when you buy and sell (flip) properties.
b) Paper Assets
From stocks and bonds to mutual funds and retirement products, paper assets are typically capital gains investments. You can also invest in stock options, stock futures, foreign exchange, REITs and EFTs.
c) Businesses
You are a business investor if you are considering starting your own business or investing in somebody else’s business.
d) Commodities
Commodities are metals such as gold, silver, and copper; food such as grains, corn, coffee, and sugar; and raw materials such as oil, gas, and cotton. Like paper assets, investing in commodities you seek generally capital gains instead of cash flow.
2. What is the best plan for investment?
Each above listed investment class, there are multitudes of types.
For example, if you invest in stocks, what types of stocks are you going to focus on? If you chose real estate as your investment of choice, there are single-family homes, apartment buildings, office buildings, shopping malls, and more that you could focus on.
Simply pick one investment type that you can be an expert on and focus on that. Once you’re comfortable with that investment, choose what you want to focus on next. So, your immediate goal should be to study up on each class, find which one excites you most, and focus your energy and passion into it for the foreseeable future.
3. What is my time frame for accomplishing my goal?
Establishing goals and placing the constraint of a time frame on them will help you to take action on your investment planning process. One of the biggest obstacles in becoming an entrepreneur is fear. An aversion to risk keeps you in constant analysis and research. When this happens, you are in the state of “analysis paralysis” and you may end up doing nothing. Don’t let fear or perfection paralyze you.
Along the way, you’ll have some successes and some failures. Failures may sound scary, but they are actually necessary. If you’re not making mistakes, you probably aren’t taking enough risks. Often times in business, as well as life, you have to embrace failure because that’s where the learning takes place. Just do not repeat the same mistakes all over and over again.
Educate yourself, adjust your direction, and move forward with your investment planning process. Take some action to get started. It’s really that simple!