What Exactly Is Intelligent Investing?
Considering the future of investing without forgetting time-tested principles
In simple words, investing in the process of setting aside a portion of your money in a profit-generating vehicle to use for a future purpose. While most people go into investment only to make money within a short period, intelligent investing goes beyond identifying a potentially profitable opportunity.
According to Benjamin Graham, the father of Value Investing, an investment is any operation that after thorough analysis promises the safety of the principal and a satisfactory return. So, you see that safety comes before profit, and to ascertain both requirements, it is necessary to carefully analyse investment opportunities. Never forget that.
So, why do people invest?
People invest for a variety of reasons, but one of the most popular reasons for investing is to create a separate source of income. However, the introduction of cryptocurrencies and tokenised assets like non-fungible tokens (NFTs) have further blurred the lines between what is common sense investing and outright speculation.
Since the 1900s rich people have always invested in arts and other collectable items like letters of influential peoples and the pieces of jewellery of royal figures, and NFTs have made this form of illiquid investing available to the general public. It should not go without saying that investing in arts — digital and physical — is a very obscure form of investing, therefore, a beginner to investing should learn adequately before venturing into this type of investment.
Getting started…
If you don’t make a list of the things you need before going shopping at the trade fair, you might end up buying worthless shiny dingles for twice your budget. This is the reality of many people who venture into investing without identifying their financial goals.
Before deciding to venture into an investment of any sort, you need to ask yourself: why I am setting this money apart? How long do I want to keep this money? What type of investment fits my goal? And, most important of all, do I have enough time, skill, and patience to analyse and manage my investment?
The answers to all these questions will help you create a plan that will guide your investment decisions, and in the end, you might find you’re better off investing in indexes or mutual funds like RiseVest, real estate, or even picking your stocks.
Your options
The introduction of digital assets has increased the delusion about what should be considered an investment, what is speculation, and what is pure financial madness. This is not uncommon on Wall Street (a popular street in the Financial District of Lower Manhattan in New York City, famous for its gigantic financial corporations, mouth-watering financial deals, and blazing history of corporate finance scandals). However, understanding the technology behind NFTs, and cryptocurrencies and how to evaluate and investing these technologies could give you access to great investment opportunities.
Investments can be broadly categorised into 4 forms: securities (stocks, bonds etc.), real estate, arts and collectables, and commodities (gold, oil, precious metals). Of all these, the most liquid is securities, while the remaining 3 are illiquid in varying degrees. However, investment in rental real estates provides passive income thereby compensating for liquidity risk. You must be surprised not to see cryptocurrencies or NFTs in the mix. Yeah, the ‘currency trading — digital or fiat’ is a culture formed by financial gamblers who decided to turn corporate FX hedging strategies into a way of making fast money. NFTs on the other hand are a digital form of investing in art, and unless they can be carefully analysed and assigned a tangible value, the selection of digital arts as part of an investment portfolio should be considered speculatory.
Securing your capital
It is considered sound wisdom among mountain climbers never to climb Everest without first checking the weather condition, and application of this principle to investment operations would save you and your family from potential financial disaster. Several factors should be considered before selecting an investment, but for the sake of this article, I will list only 4 major factors that apply to stocks and bonds.
- Inflation
- Interest rate
- Economy
- Political environment
- Foreign exchange exposure
Intelligent investing combines financial planning, self-awareness, discernment, skill, and good decision making to take advantage of promising investment opportunities without sacrificing sound investment principles.
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