INVESTMENT

Investment There are only 6 basic asset classes, and whatever form of investment you make will fall under one of these categories. As follows:

Cash
Cash is a means of store and exchange of value. Considered a safe investment because if it is in the bank then you
can’t lose it, and you get some guaranteed increase in value”, or do you? Inflation, which is the rising price of Goods and services over time, reduces the purchasing power of your money over the long term. Cash has its place in any portfolio, but if you want to outrun inflation over the long term you have to also invest in other asset classes.

Bonds
Are government or corporate debt, for example, a government can raise money by taxing people, but this would be very unpopular, or by raising money through the bond market. This market is linked to cash and inflation rates.

Equities
Stocks and shares, these represent ownership in company value and/or corporate profit/losses.

Property
Real estate, a favourite of many investors, more on this in the next section.

Commodities
Oil, tin, copper, coffee, cocoa, etc. a great way of making money because they regularly provide the opportunity to buy low, sell high. However, it is a very volatile area and the best commodity brokers in the world tend to suggest that you should only put 10% of your total wealth into commodities, and that this 10% you should be prepared to lose.

Collectibles
Portraits, paintings, wine collections, vintage cars etc, anything you can buy at a price and sell with a mark up. But planning your retirement/children’s education on the strength of a stamp collection would be a bit of a risk.

Short Term Vs Medium / Long Term

  • Short-term needs – Cash and /or liquidity (Cash is the only asset class that will not lose purchasing power in the short-term).
  • Medium to long-term growth, invest in a combination of all other asset classes.

When investing diversification is of key importance, you should have an asset allocation weighting in line with your views on risk, the time frame you are considering and your base currency (deemed as the currency you will most likely spend the money in).

Remember, probably the single most important tip on investing is “if the deal looks too good to be true, it is too good to be true”. A structured portfolio professionally managed with the assets classes rebalanced over time will produce the best results in the medium to long term.

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