Is your understanding of investment doing your money harm?

So you think you know the REAL meaning of investment?

You’ve seen me talk about investment in the past, but did you know that investing is a subjective term? It’s not as clear-cut as many wrongly assume, and means different things to different people.

So, what does investment mean to you? Here are a few tips to help you make that determination.

Don’t Take the Term for Granted

It’s easy to hear a word and just assume there is a black-and-white definition that everyone follows.

This is not always the case.

I like to think of investing in two distinct categories: passive investing and active investing.

Passive investments are incredibly common these days, and your financial advisor has probably recommended this option to you. They’re the long-term, “set it and forget it” investments. Most commonly, this is property, superannuation funds, or anything that requires little involvement on your front.

Some people prefer this type of investment because it’s safe, they don’t need to do much once they’ve made the investment, and they can see nominal gains.

On the other hand, active investing might be the better option for you. Here’s why:

· Nominal isn’t enough: For some investors, merely staying a step ahead of inflation isn’t enough. They want to build real wealth through their investments, and they want it sooner rather than later.

· You want control: When you choose a passive investment, there isn’t much that you need to do besides paying taxes every year. If you want more power to tweak your investments as you go, you want an active investment.

· You want to maximise your financial standing: With a passive investment, you are likely content with the results the universe and markets will push your way. If you would rather have more control and the opportunity to maximise your return, active investing will allow you to do just that.

Are you an active or passive investor? More importantly, what does investing mean to you? Leave a comment below, and make sure to follow this blog for future posts.

Resources:

https://www.investopedia.com/terms/a/activeinvesting.asp

https://www.investopedia.com/terms/p/passiveinvesting.asp