As I read through the book, "The Intelligent Investor" I can't help but think about investment opportunities that are available to us. While I learn the difference between a speculator and an investor, it's not hard to recognize that investing in the stock market is pure speculation at best since the principal amount is openly at risk the second the security is purchased. With hundreds of methodologies and tools available under the sun, there's plenty of ways to beat the stock market but this requires rigorous amount of time invested--if earning a good return is what you aimed for to begin with. Additionally, more time is required in learning the fundamentals such as knowing what the underlying number means (ie. dividends, market capitalization, etc.). The stock market can be an exciting investment opportunity to anyone that knows and takes time to learn the ins and outs of it. It can be treated as sport and with such events, winning is about preparation and knowing all the rules so that every given opportunity can be taken advantaged of. Although there's luck, relying on this only can lead to frustration as winning with luck changes over time and as we all know, the banker always wins leaving us less than 50% chances of success. What I learned from investing in stock market is the psychological virtue of the game, win or lose. Surviving and staying in the green for a day or so can be enlightening, but being in the red can only causes emotional distress for those who have great expectations.
If I can share one thing in this web log about investing, it will be to speculate only 10% of your principal money and keep the 90% in an investment that is secured BUT has a modest return amount. A lot of people will probably consider CD (certificate of deposit) as far as a safe investment vehicle, but with its non-liquidity attribute depending on the term, this is an unattractive investment. This however can be a possible positive advantage for individuals who compulsively withdraws money for random expenses. I also have noticed that the interest rates for CD's are not attractive either (averaging 3-3 1/2% for 1-2 year term). I personally think that the return is not worth it for its lack of liquidity, which forbids us from having flexibility with our funds if we ever decide to invest it in something else down the road.
Now we move on to Treasury Bonds, which is probably the safest investment of all and best of all, tax free. While it is safe since the Government back up the funds, the percentage may vary between 1-2% which is extremely low if you're intention is for growth. The longer you keep it in, the higher the interest will be but the percentage is comparable to that of mutual funds at best. It's pretty clear that this is a decent but the return is not attractive, at least for growth. Lastly, I'm left with either mutual funds or online savings account such as ING direct or Emigrant which yields from 3.5 to 4.15% and is liquid, which means that I can withdraw the funds anytime I wish. With the options presented, a stock market would be the best option as far as growth but there's risks involved and to which it includes even losing your initial principal amount. At this point, I'll stick to high-earning savings account while I consider other options as far as the best investment for earning higher growth potential in return. If you have suggestions, please feel free to contact me. =)