Risky Business Gone Wrong : Long Term Investment

Risky business gone wrong : long term investment looks at why invest for long term is risky business, as opposed to majority believes. Let’s look at a very important question: how many 30 years section do you have in your lifetime? The most is 2, for some people.

What if you invest in some investment vehicle where you contribute a sum of money every month and after 20 or 30 years, something somehow went wrong and you couldn’t get back what you expected or supposed to get?

Why Long Term Investment is Risky Business

According to business dictionary, long term investment means an investment instrument (bond, debenture, preferred stock/preference shares) that matures in more than 10 years. For ordinary people, this could mean life insurance,mutual funds, investment linked financial vehicle etc.

Even though the media frequently advises people to “invest for the long term”, determining whether or not an investment is long term is very subjective. Here, we shall define the long term to anything more than 10 years.

Let’s look at insurance policy as an example. What the majority purchase is a 30-40 years term of insurance policy, where they need to “serve” and pay monthly for the insurance they bought/”invest”.

Let’s be honest with yourself: Would you really be able to know what exactly is going to happen in the next 30-40 years?

30 years before, China just opened up it’s market, Soviet is still a communist country. Unless you are the prophet, nobody knows the world is going to be what it is today.

Now, let’s imagine how the world could be after 30 years from now.

War,hyperinflation,huge natural disasters,or bankruptcy of insurance companies, who could guarantee that such things won’t happen?

For a normal person with a life span of over 60 years, he/she is sure to see or heard of a bank or a financial institution going out of business (remember 2008/2009?).

When risky business gone wrong, especially for your long term investment of your hard earned money, who is going to be responsible for it?

When the stock market began to crash in 2007, that meant cash was flowing out of the market to other assets. As the market crashed, it’s a safe bet that 90 percent of investors lost money because they were too slow in moving it.

They were slow because they were told the financial fairytale about investing for the long term in a well-diversified portfolio of mutual funds.

Lessons from Risky Business Gone Wrong

To avoid being wipe out and realized the reality only when you are too old to start again, it is very important to start educating yourself financially, NOW.

5 Useful Ideas on Investment

1. The investment has to make sense TODAY, not tomorrow.

2. Understand the concepts of Assets and Liabilities well enough.
Assets put money in your pocket, Liabilities take money out of your pocket. Assets feed you, liabilities eat you. ~ From Robert Kiyosaki Book

3. Instead of working for a lifetime, and saving for a lifetime, my financial independence is NOW. Why work hard, invest for the long term in a well-diversified portfolio of stocks, bonds, and mutual funds, and retire on age 55 or older when you can retire young retire rich?

4. When my monthly cash flow from my assets is equal to or greater than my monthly living expenses, then I am financially independent. The importance of this definition is CONTROL.

5. The key is that it should be an investment from which you RECEIVE money on a regular basis – it provides positive cash flow.

“By focusing on increasing our assets, we pay less in taxes, use debt to acquire them, and watch inflation increase our cash flow, which means that rather than sending our retirement savings to Wall Street,we put our money into our pockets via cash flow from businesses and personal assets.” ~Robert Kiyosaki

To avoid risky business gone wrong is not necessarily easy. It does take time and education.

From a very frequent linked video on youtube (shared below), you shall notice that if things go wrong when you are young, you could still have time and chances to do it again, but not when you are too old to began again. So, try to avoid risky business gone wrong situations with financial education.

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