| In the world of investing there are many
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| | Common examples of active investments are
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| different investment vehicles and
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| | share, options, futures, and currency
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| strategies but they can be split into
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| | trading, buy and hold share portfolio
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| three broad categories. The advantage of
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| | building, buy and hold residential or
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| thinking from this point of view is that
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| | commercial property, and property
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| it makes it easier to decide which form
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| | trading.
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| of investing or which combination of
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| | Creative Investing
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| investing will best suit you.
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| | With creative investing you actually
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| Let's have a look at the three broad
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| | change the investment in some way that is
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| categories of investing and look at the
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| | designed to manufacture profit. This form
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| advantages and disadvantages of each.
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| | of investment requires a lot of skill and
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| Passive Investing
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| | experience but if you have that skill and
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| Passive investing is when you put the
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| | experience then you can create huge
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| investment decision making into the hands
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| | profits by being able to visualize what
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| of someone else, ideally an expert
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| | your investment could be once you have
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| investment manager.
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| | applied your imagination to it. For this
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| The advantages of passive investment are
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| | reason creative investing is often
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| that you are not required to have any
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| | described as turning thought into money.
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| investment expertise and you don't have
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| | For example if you are a property
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| to invest your time, only your money. The
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| | developer there is a huge variety of
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| disadvantages are that firstly you have
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| | possible developments that you could
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| relinquished your control over your money
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| | design and build on a particular piece of
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| and secondly the returns for these types
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| | land. Amongst that huge set of
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| of investment are usually uninspiring.
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| | possibilities there are also a huge range
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| Common examples of passive investing are
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| | of potential outcomes ranging from high
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| savings accounts, government bonds,
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| | profit to huge loss and including all the
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| property trusts and mutual funds. Most
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| | points in between.
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| people invest for their retirement under
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| | The advantages of creative investing are
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| some form of passive investment that
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| | that it has the highest profit potential
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| usually has special tax concessions which
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| | and the highest degree of control and
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| vary from country to country.
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| | flexibility. The disadvantages are that
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| Active Investing
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| | it requires the highest degree of
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| With active investing you take an active
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| | knowledge, usually involves borrowing
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| role in managing the investment. This
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| | large sums of money and also has a huge
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| form of investing could have a long term
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| | potential for large losses if you get it
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| focus such as a buy and hold share
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| | wrong.
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| portfolio or it could be a short term
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| | Common examples of creative investments
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| focus such as futures trading.
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| | are property development, property
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| To do well in active investing you need
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| | renovation, business renovation and new
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| to have considerable knowledge of the
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| | product development and marketing.
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| investment vehicle or vehicles that you
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| | When you are deciding which of these
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| are using. You also need to understand
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| | three broad categories best suits you
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| the basic principles such as when to
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| | need to consider your knowledge and
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| collect profits, when to cut losses and
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| | experience, your strengths and
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| how to analyze the market. You also need
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| | weaknesses, your access to resources,
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| the emotional strength to apply these
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| | including time and money, and in
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| strategies as required (this is often the
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| | particular you need to consider your
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| most difficult aspect of active
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| | personality including your time
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| investing).
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| | management skills, decision making
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| The advantages of active investing are
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| | skills, tolerance for risk and your self
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| that you have greater control over your
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| | discipline.
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| investment than you do with passive
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| | There are of course many expert
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| investing and the potential for profit is
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| | consultants to help you in each field and
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| theoretically higher. The disadvantages
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| | many sources of knowledge and experience
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| are that you need to invest time in
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| | to tap into.
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| acquiring knowledge and skills and in
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| | I hope that this article was useful in
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| managing your investments and also that
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| | helping you see where the various types
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| the potential for loss is also generally
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| | of investments fit into the scheme of
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| far greater than in passive investing.
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| | things.
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