The 2 Categories of job for your money

In our last session, we talked about finding out what are the kind of jobs which you can assign your money to work in to yield profits for you.

There are tons and tons of different jobs for you to assign to "them"

But generally speaking, among all the jobs that money can take on, it is categorized into 2 types,

1. Capital gain
2. Cash flow

1 + 2 = Capital gain + Cash flow

When you talk about investing, yup investing is a high class word for your money working for you.

When you talk about investing, most people tells you they invest in unit trust(most common kind of investment) follows by individual stocks, or ETFs (it's getting more popular among investors).

These group of people invests for capital gain.
Capital gain investors usually work on a buy low sell high kind of strategy.

When they markets go into a depression, there are 2 groups of capital gain investors.

1. "Lucky I sold mine before the market drop, now I'm going to buy everything at a discount!"

2. "Why didn't I saw it coming!" Their funds are being locked up and they cannot sell, if not their paper loss will translate into a physcial loss.

The second group of people invests for cash flow.
Cash flow investors basically ignores the market.

As long as their investments put money into their pocket on a consistent basis.

So working out using maths, it looks something like this.

John buys an Investment for $10

Every year the investment promise to pay john 1 dollar for the rest of his life.

So it takes 10 years for john to break even.

On the 11th year onwards, John starts making a profit until he expires.

Good market, Bad market, every year john will still pocket a dollar.

In the market, such investments come in a form of dividends of a stock or funds or rental income.

But a real estate is a combination of capital gain investing + cash flow investing.

However, they are people speculating properties like a stock, purely for capital gain, quick bucks.

Nothing wrong with that as long as you are well versed in that area.

Some of the more popular cash flow investments for people who can't afford to yet invest in real estate are investment like REITS( Real Estate Investment Trusts).

However, REITS are slow and "boring" to some people due to it slow movement in the market.

Young people like me are full of energy and wants excitment, so they still prefer individual company stocks.

But what if you can buy individual stocks and get cash flow out of it on a consistent basis, instead of making a profit only when you sell off the shares?

You can use another instruments called options.

Like a call and put options. yep. you get what I mean. But i seriously think that trading options without owning the underlying shares of the options which you are trading is risky. Maybe it is because I'm not well versed in that area, maybe some options expert will tell you that it isn't that risky after all?

But there is one thing I stick to, which is I don't touch instruments which I don't understand.

It is in your best interests that you study the different investing instruments that are available to us.

Cause at the end of the day, you're the one making the profits, enjoying the fruits of your money's labour!

After labouring for yet another year(it's november now), it is seriously time to labour for yourself and your family.

Spend more time minding your own business, but please, still, do a good job at work.

Happy working !