In a recent post, we tackled the problem of how to save money.  The next logical action is to put our money to work.  As we’ve mentioned before, the first and best “investment” you can make is any education that will help you increase your cashflow.  As we normally invest from our abundance, cashflow is king.  The topic today is investing in actual market based assets that are relatively liquid, such as stocks, bonds, etc…  Because we publish our own newsletter that helps subscribers manage their 401k’s, I won’t tell you our precise methodology.  However, at the same time, our real goal is to empower readers to a better future.  That being said, If you cannot afford the $9.16 per month for an excellent investment strategy, I at least want to give you enough information so that you can do something to improve your performance and protect your savings.

According to George Clason’s “The Richest Man in Babylon“, the second law of gold states:

 

Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

One of my favorite shows to watch on TV is called “Bar Rescue“.  This is essentially a reality show where the host, Jon Taffer, goes from business to business and helps the owner fix what’s wrong.  For some reason, it’s incredibly easy to see things more clearly when you’re looking at other people’s problems.  For Taffer, applying the wisdom learned over his career, seems to be a solid recipe for most businesses the show encounters.  The root of his assessments for each business is essentially this question (though it is never actually asked), “Are your resources working as hard as they could be? You know… Land, Labor, and Capital?”

Consequently, Clason’s quote from above should stir us to ask the same of ourselves “Is our money working as hard as it could be?”  Studies show that among American workers:

• 91% Participate in their employer’s savings / 401k plan
• 9% Do not participate in any savings / 401k plan

Of those who participate, the greater majority will simply pick funds at random, or use target dated funds.  Both are terrible options for a variety of reasons.  91% of workers are at least doing something right, but are they doing as well as they could be?  We know from economics that resources always flow to where they are best used.  If you want to have more, you need to be doing very well with what you currently have.

The First Step To Growing Your Money

One of my first books about “investing” was Andy Beyer’s book “Picking Winners“.  Of course the book was really about handicapping horse races, but amazingly, many of the basic principles also apply to market based investments.  Beyer wrote extensively about money management, which speaks to managing risk and how to appropriately size your bets at various times.  This is actually a critical piece of portfolio construction at my father’s investment firm today.

Early in the book, Beyer delivers this gem, “Here it was, the Secret to Beating the Races: there was no one secret! The horseplayers like me who searched for the great underlying truth of handicapping were as misdirected as the alchemists who spent their entire lives trying to find the philosophers’ stone… the winning player is not the man who holds the proper set of dogmatic beliefs, but the one who can observe and adapt to the ever-changing conditions of the sport.”

He continued with a longer segment about the role of track conditions.  For our purposes, “track conditions” are “market conditions”, the place where our horses run.  It is this changing environment to which we need to pay close attention.  Our very first thought about placing an actual investment should be first about who we are as an investor and secondarily the condition of the market…  (to be continued)

What are you current first steps to investing? Do you have a process in place?