Investing is risky. Not investing is risky.

To invest or not to invest that is the question.

In today's blog I have 2 goals. The first to show you why you should invest. The second is to educate you on types of investments.

As a quote from Robert Kiyosaki’s Rich Dad Poor Dad.
You have two sides of this equation, or two basic mindsets.
1. You think that investing is risky
2. You think not investing is risky
It is an individual comfort level, but it is also different financial IQ's when it comes to money and investing.

Ravenscraft Investments are in camp 2. Not investing is risky. The money you earn and hold loses value every day. You also have to factor in inflation. Your job and earned income is most likely your highest taxed money. If you can have some sort of investment going like paper assets. From 2008-2011 Earned income tax rate 35%, Short term capitol gains 35%, Long term capitol gains 15%. You can see that if you move money from the 35%  to the 15%, you save or gain 20%. And this is just one type of investment, paper assets. So if you can hold stocks long term you save on taxes. If you buy a stock that pays a dividend than you get paid 3%-5% or something close to this range. Think of these as bonus returns. Remember this is only one type of investment in our toolbox.

Here are the top markets or popular markets: The first three are paper investments, the last two are physical Commodities.



NYSE      11,444
Nasdac     2,532
S&P500    1,999
Oil 87.26
Gold  at 1,663oz

 Commodities are split taxed. 60% is taxed as Long term capitol gains and 40% is taxed as short term capitol gains.(so 15% and 35%) The FOREX market is also taxed in this way....Moving on.

Here is what the investment markets look like to me:

1.FOREX
2.Commodities
3.The Stock Markets
4.Real Estate
5.Business

I would consider each category it's own type of investment. It is critical that you have investments in 2 or 3 of the above options. You also have active investments, and passive investments (long term)
And you should pay attention to both.

I started this blog thinking of how the stock-market has tanked these last two weeks and how discouraged people might be. It made me think of the people that only have their long term 401,Mutual fund, or IRA to watch as the markets move. I say watch because that is all they can do. It is a process to get-out of any of these long term investments, and in most cases you get penalty charges for doing so. The 90% of us just watch and are happy when the markets go up, and sad when they go down. This brings me to a key point...Liquidity. Long term investments in a 401.403,IRA, Mutual fund are not very liquid.
This is what most of us are in the dark about.  So what is liquidity and why do you have to have it.

Definition of Liquidity on Investopedia - 1. The degree to which an asset or security can be bought or sold in the market without affecting the asset's price.

It really means how fast can you get in and out of an investment. How fast can you close a position.
Years of research has shown me that liquidity is the key, you have to be able to get in and out fast.

With most stocks you can exit a trade in minutes or hours it all depends on having one person on the other side of your investment.

Commodities are about the same. The other big plus is that they are tied to physical items oil/gold/sugar/corn and so on, so they will always have some value. When it comes to options you can sell them for a profit even if they never hit the strike price. Not true for stock options, they have to go above the strike price before you can sell them.

FOREX is the most liquid investment out there.(Real Estate may be the only exception here)
Over 2 trillion a day trades hands through the FOREX markets of the world. They represent cash prices the now, not the future price like the futures markets. You can get in and out of these markets in seconds.

I will have more to say on each of these investments in future posts.
For now I want to leave you with this. How many of the above  numbered investments do you have?

The truth is the more of these numbers you invest in the less things like the last two weeks of the stock markets cliff diving. If you are in only one than you may be in trouble.
Keep learning and make your money work for you.

Shawn Ravenscraft   Ravenscraft investments