A lot of people seek advise on where to invest. I can list 100s of avenues where you can invest but how would you choose? I believe it is much more important to understand where not to invest. To put it simply, don’t invest in something you don’t understand.
Remember the cryptocurrency boom a few years back? Before I continue, let me say that I am a guilty party of investing in it. I made 300% gains on paper and then went down more than 60%.
That was a perfect lesson for me on why one should not invest in something one does not understand. The only saving grace was, I had only invested an amount which I was comfortable even if it went to zero. It was an idiotic risk I took, but it did give me a good insight.
Every decade or so, some similar story of a golden goose of investment comes up and hordes of investors dump their money hearing about some chap making tons of returns. For people who are planning early retirement, my advice is not to fall into this trap of making quick bucks. Anything that says invest now, get rich quickly is exactly something you should stay away from. If something is actually a good investment it would be so for at least 10-15 years, if not more.
Is mutual fund or real estate the best investment then?
I have started giving similar advice to people who are blindly investing in mutual funds. Please do not invest because your friend or family is doing so. Or because an investment advisor is telling you to do that. While the advice may or may not be sound, but if you have not educated yourself enough before investing, then you might as well book a ticket to Vegas and gamble on your luck.
That being said, the reason investing in mutual funds or stocks is much more dependable is because you are investing in an actual business or company, about which you can get as much detail to make it a logical decision.
Same is the case with real estate, it is still a sound investment rather than investing in cryptocurrency. Because there is a real asset and logical indicators to inform you why a particular real estate should, in theory, go up or down. However, my advice would be to ditch real estate for investing in the stock market. Read my post on why real estate investment is not the best investment in India.
What to do?
To summarise, if you are investing for the long run, read about the particular investment before you invest.
Also, after you have educated yourself a little, always wait at least a week before you invest. Never invest on the spot. Reason being, once something is on your mind you are more likely to spot trends, news and other articles around the same while you are surfing the web, reading the newspaper or chatting with other people. You can then take a much more informed decision rather than the one you would take if you invest on the spot. You might want to read about investment lessons from Game of Thrones here.