It may seem daunting, the investment world, if you can say anything about it, would be that there is a lot of choice. Most of these options are pre-packaged solutions that the marketing departments of these financial organizations, has determined is what the market wants.
There are entry costs to any investment and this often severely erodes returns, that is if a return is achieved. The goal of any investor is to compound their capital every year at the highest possible compounder. The reason for this is simply that interest upon interest grows money exponentially. The higher the compounder, the more mathematically skewed that return is.
The other objective a professional investor has is to reduce risk. This can seem like a very vague thing to many people. Reduce risk? What risk? How do I reduce it?
Something all investors recognize, this is a fundamental truth. To invest, you need to part with money. The funds need to leave your account. You give the money to another and there is always risk associated with that. The only exception to this rule is the humble bank deposit. A bank is a special type of corporate entity that is guaranteed by the government. This type of investment is very safe, however it is also very low yielding. 6% per year is nothing to get excited about.
But lets think about that for a second. If we have two objectives, to compound our money as highly as possible every year and to reduce risk. The second objective, to reduce risk, needs to be addressed. If you part with investment money and give it to someone else, without insuring what you received for your money has tangible intrinsic value, then you are risking money and the risk is out of your control.
I hope this made sense. When you get a letter acknowledging that you gave so and so company $5000 what have you received for your $5000? Just a letter, telling you what you already know. That you invested your cash with them. There is no tangible intrinsic value in that letter unless it has extensive gold leaf all over the letter to the value of $5000
Your money has left your hands and is in the hands of another. You exchanged your cash for nothing of worth and therefore, you relinquished all control of those funds. The ideal risk neutralization is to get something of worth in exchange for your money. Then, you still have your capital in the form of a different value.
Lets consider how this can be accomplished. If you had a very small seed capital account, Say you had only $100 to start your investment activities. OK well what can you buy to re-sell with $100? A mountain bike? A TV or a CD system? The point of investing is to get a return. Thats all. How you get that return is completely up to you. If you spent $100 on a TV this week, that you ascertained before buying it, that it was actually worth $180 and you sold that TV within just one week, for lets say $140 to get a quick sale. You would have made a 40% return within a week. An astonishing level of compounding if you can keep it up each week. (which would be easy)
The point of the above example illustrates what I mean about reducing risk. If you found an investment object with an intrinsic value, above what you paid for it in real cash, you have fully and completely eliminated risk. The money has left your account, but you have a real and tangible good, that you exchanged the investment capital for. This is the perfect investment.