Investing Basics : Put Your Money to Work Making More Money

Savings vs Investing

There’s saving and there’s investing. Anyone can save. Heck, I started saving before I was even a teenager, by putting money in a bank in my bedroom.

The amount grew, but only when I put more money in. My money wasn’t making money.

Investing, on the other hand, is saving “On Steroids.” Investing allows your money to make money.

According to Value Penguin Inc., average Savings Account rates of return vary from 0.01% to a bit over 1.0%. That’s not much. In fact, depending upon inflation, the rate of return could actually be negative.

How about CDs, Certificates of Deposit? According to US News, CD’s don’t offer much over 1.0% either, so they’re not much better than savings accounts.

Money Market accounts, on the other hand, still average below 2.0%, according to Bankrate. Some, even lower than CDs and savings accounts.

US Savings Bonds were a very popular item, years ago. My son and daughter each have a bond that my parents got them when they were little, $75.00 at maturity. Thing is, savings bonds grow at such a small rate of return that it takes quite some time before they reach face value.

According to Treasury Direct dot Gov, US Savings bonds vary each month and by the bond type. The highest I noted was a bit under 5.0%, much better than other avenues, but that was a special bond.

So, how does Inflation come into play with saving and investing?

“The current inflation rate for the United States is 1.7% for the 12 months ended July 2017, as published on August 11, 2017, by the U.S. Labor Department.” – US Inflation Calculator

With that, anything that has a return less than 1.7 is actually losing money. Yep, saving isn’t the best way to stockpile your money.

On the other hand, Investing, unlike savings, provides opportunities for growth that’s well above the rates of return noted above. As I mentioned earlier, investing is saving “On Steroids.”

Investment Vehicles

So, where can you put your money, so that it has a higher rate of return than savings, accounts? There are a number of options, even for those without a large amount of capital.

Stock Market

My favorite place to invest money is the Stock Market. Sure, there’s Volatility, but without it, there would be no growth. Volatility is not just the negative movement in the market, but also the positive.

“The worst 30-year return — using rolling monthly performance — occurred at the height of the market just before the Great Depression and stocks still returned almost 8% per year over the ensuing three decades.” – Business Insider

Even with the great depression, the market still had an overall average return of 8% per year.

My wife and I have been in the market since the early ’90’s, but it wasn’t until 2013, when we moved our portfolio to Fidelity, managed by Fisher Investments, that I’ve actually kept up with our rates of return.

We moved our largest portfolio to Fidelity in March of 2013 and as of today, Sept. 4, 2017, it’s up from $386,551.10 to $535,279.69, with a growth of $148,728.59, which is 38.48% of our initial investment. That’s $2704.56 average growth per month, over 55 months.

Cool thing about it, we haven’t put anything in since July of 2014 when we started drawing $2,000 a month from it when I officially retired after heart surgery.

Nice thing about investing in the Stock Market, it doesn’t take a bunch of cash up front, so anybody can get started right away.

Real Estate

We didn’t set out to invest in real estate, it just happened. When we moved from Denton, TX, to outside my Mom and Dad’s hometown of Cuero, TX, our adult kids had to find a place to live. They were still living with us at the time, so it was either they find places to rent/buy, or rent our old house.

We moved in 2006 and our Son and his Wife still lease our old house, which is totally paid for. They don’t pay market value in rent, but the amount they do pay still nets us almost $600.00 a month income. That pays the property tax each year, with a little held back for upkeep.

Since we’re 330+ miles away, I keep a checking and savings account in Denton. All the rental money goes through it, so it’s out of sight, out of mind.

Not only is it a money maker for us now. The house was originally valued at just under $80,000.00. It’s now valued at about $139,000.00, that’s from 1994 until now.

Our current house, which will be our last house. Was built in 2006, for $188,000.00; tied to 33 acres in the mortgage. We modified our loan from a 30-year, 6.75% note, with almost 20 years to go, to a 15-year, 4.25% note. In doing so, we had to have the place surveyed and appraised.

In modifying the mortgage, we encumbered 6.46 acres with the house, the shop, the hangar, greenhouse, hot tub house, and tractor shed. Those 6.46 acres, house, and buildings were appraised for $250,000.00, an increase of almost 25%, with a reduction of over 20 acres in the value. Not bad for 10 years.

Precious Metals

“Consider the market period between February 2007 and February 2008. Precious metals funds were up an average of 42.90% in the one-year period ending Feb. 29. Large cap growth funds, meanwhile, were up less than 1% during the same time period, according to Morningstar.” – Investopedia dot Com

Further reading reveals that precious metals tend to do poorly when the stock market does well, and vice versa.

I’d never really thought of investing in precious metals, but now may be the time. Hmmmmmm.

Bitcoin

“Seven years ago, the value of a single bitcoin was worth a quarter-of-a-cent. Today, that single bitcoin is worth upwards of $2,200.” – Fortune dot Com

Wow! I’ve never really paid attention to Bitcoin, but I wish that I had. I think I’m going to have to take a closer look at Bitcoin.

Crowd Funding

Crowd funding is another “out of the box” investment vehicle. I recently wrote a piece about an upcoming Christmas Movie that is being funded by Crowd Funding investors. Investing Through Crowdfunding: Want to Invest in a Christmas Movie?

I don’t have any info on rates of return in crowd funding investments, as they options are so diverse. I can’t say that it’s something that I’m interested in putting my money into.

Collectable Coins

If you know J. Money of Budgets are Sexy and Rockstar Finance, then you know that J. is a coin collector. Heck, J. is a “Penny Picker Upper” as he can’t let those Lincoln’s just lie there. 🙂

Of course, the average penny is not a great investment, but the special ones and other special coins can be worth a bit of . . . wait. . . here it comes. . . COIN!!! Sorry, I just had to do it. “Shame on you Shin!”

“Over the last 62 years, this asset category has delivered an arithmetic mean annual return (before inflation) of 10.5 percent with a relatively low standard deviation of 12.3 percent.” – Financial Planning Association

Collector Vehicles

“You’re probably not going to make that same 10,000% return over 24 years, or some 416% annually, on classic cars. But according to Historic Automobile Group, publisher of five HAGI indices tracking the going prices of classic autos, you would have made 31.47% year-to-date.” – Wealth Daily

I’m a “Gear Head” so I own a few collector vehicles. I didn’t buy them as investments, though. My 1965 Chevrolet Impala Super Sport is my Mom and Dad’s first “bought new” car. It’s worth less than what I paid to restore it, so it’s not an investment, but it’s worth a “Ton” to me.

I have my Dad’s Original 1978 Honda CB400T Hawk, that he bought as the 2nd owner. It still has the original tires, complete with age cracks. It was a gift from my Mom on my Dad’s passing, so it’s not an investment either, although it is worth a fair amount more now than it was when it was new.

Our 1931 Ford Model A Roadster Pickup is well used an ugly, but cute at the same time. I said it’s as cute and ugly as a toad, and being a roadster (No Hard Roof and Windows) it now has the name Toadster.

Selling new for less than $2,000.00, Toadster is now worth about $10,000.00 as is. I paid less than $8,000.00 for him. So, yep, a good investment.

I’ve got a few other collectible vehicles in various stages of restoration; two 1966 Mustangs, and a 1972 Chevy Fleetside Pickup, and a 1964 Chevy Stepside Pickup.

Oh, almost forgot the 1980 Kawasaki KZ1000E Shaft-Drive motorcycle that’s worth a few thousand more than when it was new.

And That’s Not All Folks

Of course, there’s a myriad of options for investing, so there should be something that you can sink your hard earned bucks into. Successful investing really boils down to two basic steps.