- Investing money doesn't have to be high risk.
- There are three ingredients of any good investment: growth, stability, and liquidity.
- The key to any good investment is to find a balance that you're comfortable with.
Every day, we make financial decisions to give us a level of comfort: air conditioning, vehicles, food, drinks, home improvements, travel — all are to provide some sort of additional comfort.
So why should your investments be any different? Many financial professionals and investors purely look at the "best investment" when making recommendations, but sometimes people want the most comfortable investment.
I tell my clients that there is a "comfort spectrum" when it comes to everything.
- Food: On one end is toast with mustard (a snack my grandmother had as a child during the Great Depression) and on the other end is caviar.
- Vehicles: On one end is a beat up bicycle and on the other is a Lamborghini.
I could go on, but I think you get the point.
Comfort spectrums
Investments are no different and no less important. There are actually three different comfort spectrums you have to look at when making investment decisions.
One of my good friends, who is a car person, always told me: "You can have a fast car, you can have a reliable car or you can have a cheap car. Now pick two of those things." The same goes for investments. Applying that same "pick two" formula here's what you're left with:
- Stable + Liquid = Not Growing
- Liquid + Growth = Not Stable
- Stable + Growth = Not Liquid
If you think you've found an investment that is safe, liquid and will grow, you may want to seek a second opinion.
Remember, this is a spectrum. You don't have to be, and you probably shouldn't be, at the extreme end of any of the spectrums with all of your money. The key is to find a balance that you're comfortable with.
If you don't think you've found your comfort zone yet, please find a financial professional you trust and have them help you with finding the right investments that fit into your comfort zone.
Don Anders is the cofounder and senior partner of Anders & Anders Financial Group. He specializes in retirement investments and portfolio management.
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