Dear Daughter,
Once upon a time, there was a guy who wanted to invest in real estate.
During his studies on the topic, he heard many times about investing in stocks. Many people refer to this topic in different ways.
He didn’t pay attention to this topic. He thought it was a kind of gambling.
And every day, he kept studying how he can invest in real estate. He learned a lot about it.
Topics about investing in real estate
These are some of the topics he learned about:
- How to use leverage (debt) to his own advantage.
- Things to be considered as an investment cost.
- Amortization schedule.
- Cash flow.
- Maintenance reserve.
- Return on investment.
- and many more.
Every time he run the numbers on a specific property, it was not good.
If he used too much leverage, the cash flow will be negative (bad, very bad).
If he were to use less leverage, putting more money from his own pocket until the cash flow was positive, then the return on interest was lower than having the money in a saving account. Still too bad.
Properties were too expensive to be considered a good investment at that time. It is better to have the money in a more secure savings account than to invest it in a property, under his current conditions, and the current knowledge he had.
Investing a small amount of money: the stock market
Until one day, he decided to look for other ways to invest. Especially, ways that the investor can start with a small amount of money.
The stock market came back to the table.
Because, according to the readings, it was kind of easier to start (than real estate) with a small amount of money.
He read every single book that came his way about investing in the stock market. He paid special attention to all the details because at the time, he thought that it was like gambling. Something he will never do, especially with hard earn money.
He even went to the extent of paying for an accounting course. Because everything pointed out that you need to know accounting if you want to be an investor. At least, if you want to invest yourself.
And because of this, he understood that investing in the stock market is not gambling. Although some people do gamble in the stock market.
Finding a good company
He saw the potential of buying a piece of a good company and being rewarded for putting his money into that business.
So, he started to study several companies and decide to pick one to put a certain (small) amount of money.
After several months, he found a great company, by reading many financial statements and annual reports. Then, he did his first investment in a company chosen by him.
Finally, after a year, he saw how the investment grew.
And in the second year, the investment grew again. He experienced the potential of good investments and he got the reward for the hard work:
- many many hours of study
- and money working for him
Now, because of that investment, he is entitled to a percentage of the profit of the company he bought, twice a year.
Sounds nice. Isn’t it? Getting paid, twice a year, for putting your money in the right place.
And ever since that day, he keeps investing every amount that he can spare.
So, with time, he will have enough money working for him.
And he will be finally free to be wherever he wants to be with whomever he wants to be, without being worried about having to work for money.
Love you, dad.