Hindsight is 20/20. After all the mistakes I could have possibly made, the safest investment would have been the bank certificate of deposit, albeit the lowest in terms of return on investment. Most investors would laugh at me and think, “Reiko, you’re an idiot.” Frankly, I don’t care what others think. From where I stand today, the “lowest ROI” would have been better than the huge losses that I had sustained by taking uncalculated risks. Having had a lot of money saved for retirement must have made me arrogant – as if I knew how to invest correctly. NOT!
I was thrown into investing my own funds at age 55 with no training whatsoever. Bank CDs were not in the realm of my thought as an investment avenue, but they should have been. They do not require much investment knowledge. You would still want to shop and compare rates and terms before you sign up but, after this nominal up-front work, you can simply enjoy its unremarkable but reliable growth over time. With CDs, the return on your investment is known when you place the funds. If I knew then how expensive and how much work it would be to explore other investment avenues, upon retirement, I would have put all my retirement savings – what was left of it after the market crash – into a savings account and focused more on the life of leisure and travel with David.
Instead, because of the crash, I felt the need to learn to be in control of my own investments to get a decent ROI. First, I investigated doing my own stock picks. Long story short, it was not for me. It turned out to be a complete waste of time.
Next came tax-lien certificates – for David. It was sold to everyone at an investment conference as the “safest” investment because it was backed by the government. By this time, I had developed a certain level of skepticism toward any investment avenues that I did not fully understand, no matter what anybody said. Nonetheless, David chose to put all his savings from his IRA into tax-lien certificates. I was very uncomfortable with the idea, but we always kept our financial affairs separate. I respected the fact that it was his money and that he believed it was the right thing to do.
To be sure, tax-lien certificates would have been safe if he had invested in them with an equal amount of money still left in the retirement account – to have the ability to foreclose on properties, should it become necessary. The seller never explained this to him, however. From where I stood, the seller should have been sued, but David chose not to do so, even though he lost it all in the end. I still remember his face turning as white as a sheet upon hearing the news from the government personnel in Illinois. Tax-lien certificates can indeed be safe if investors understand the details of why it is safe and, more importantly, HOW to make them so.
Then I moved on to the real estate and have been sticking with it ever since. While I made some very expensive mistakes, once I understood the key to real estate investing, I found it to be quite straightforward and safe. The secret, which is not a secret at all, is to start small and ensure positive cash flow one property at a time. It is as simple as that!
The bottom line: Be careful when you listen to people who tell you that something is the safest investment. Don’t ever take their word for it – no matter how trustworthy they seem. No one cares about the safety of your money as you would yourself. An investment is safe only when you intimately understand the ins and outs of each investment. The only way to achieve such a goal is to start small. Make all the mistakes you can with a tiny investment. If you sustain a loss, that’s okay because it will be kept small; yet the lessons you learn will be just as invaluable. If you make a small profit, understand how it happened. Was it dumb luck? Or was it because you really understood how to make it happen? You’d be proud of yourself when you know that it was the latter.
Happy investing!
