Safe Investment vs. Secured Investment

Safety requires that you may do something along the lines of what the previously mentioned article indicated: put your money in very low risk paper investments managed by someone else so you can see your numbers go up slowly, but you’re not really getting ahead.

Security can put you in a position where you have full or part ownership in the asset itself, thus having much greater control and if you’ve got the right assets, you’re hedged against inflation.

Let’s use some examples: paper, gold/silver, real estate – all of which can be bought and sold as paper (ETF’s for gold/silver and REIT’s for real estate)

Paper investments: Certainly not my favourite because it is so volatile. Global economies, currency wars, quantitative easing (i.e. pumping money into the economy), lack of control, etc. I’m sure people can rattle of a number of positives, and that’s fine, I’m merely stating my opinion. Looking at the Dow Jones Industrial Average (Wiki Link) we can see that it’s had some trouble in recent years and has always been prone to booms and busts. In the first graph, you will see the recent economic meltdown we went through and the subsequent rise of the DJIA. Keep in mind however, that this rise is fully due to the amount of money governments pumped into their economies to keep them afloat.

Dow Jones Industrial Average vs Gold

Therefore, when compared to gold in the second graph, you will notice that the DJIA has fallen and remained stagnant. Additionally, if these paper investments tumble further or are wiped out, you’re left with nothing, because you owned paper, not the actual business. So paper may be safe, but it certainly isn’t secure.

Gold/Silver: These commodities are an example of a hard asset. If you chose to purchase gold/silver in their physical form as opposed to an ETF, then whether the market goes up-down-or-sideways, you have full ownership of your bounty. After all, these are the investment vehicles that entire countries use to hold their wealth, so why not you? If/when all paper fails, hard assets always carry intrinsic value.

Gold / Silver

Real Estate: While gold/silver may have a leg up on paper investments, they still do not cash flow every month. In other words, even though you may have full ownership of gold/silver in its physical form, it doesn’t pay your bills every month. That’s where real estate comes in. With real estate you can have full or part ownership; you get the benefit of price appreciation as well as monthly cash flow; and you are hedged against inflation very nicely.

Single Family Residential Real Estate

This is the wealth creation strategy that my business partners and I use because we focus on creating 3 incomes out of every investment opportunity we deal with currently. Moreover, as a Wealth Creator, I work with other local real estate investors to realize similar gains. We find the right opportunity, manage the returns, provide an easy exit strategy, and all the while your wealth is secured by physical local real estate. THAT is security. Stocks, ETF’s allow you to buy a share in many companies, but you don’t have a say in the management of the company. On the other hand, a real estate investment gives you full or part ownership in a tangible asset in the ground.

I believe it is clear that a safe investment is not necessarily a secured investment; however a secured investment will most likely be a safe investment.

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