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