So you saved, inherited, profited from the sale of assets or won money, what’s next? Firstly, you need to understand that having a large cash position can be as bad as having no cash. Secondly, finding a home for your cash is not as simple as just buying things, things you purchase must give you a return that you personally need or want. Finally, your fortune must be shared to further develop your family, your community, your country, a relevant sector and the world.Most of us commonly misunderstand the statement ‘having no cash’ to only mean poor or bankrupt. With all monies invested (cash is zero as a percentage of your net worth), one can find oneself unable to meet current expenses, unable to fund new acquisitions or having experienced a loss in asset values, unable to borrow at commercial rates. Simply put, ‘having no cash’ can mean; not generating enough income, not having enough savings or not having enough tangible assets to use as security for a loan. In the same light ‘having plenty cash’ can be misunderstood to mean rich or influential. With a large cash position (cash at a high percentage of your net worth), you can find your overall portfolio diminishing in its ability to produce earnings, at risk from currency depreciation, not forgetting the actual physical exposure. Hence, ‘having plenty cash’ can mean; less income generation, losing purchasing power and exposing real cash to damage or theft.
Your portfolio must contain a moderate cash position that matches your needs and wants, and to maintain cash flow, no more and no less. Therefore, all excess cash must be significantly deployed into various investment instruments. Your portfolio should be arranged into two major sections other than cash; debt or bonds and equity or shares and should be proportioned and mixed to balance levels of risk to projected rewards. The debt portion of your portfolio is where you keep values safe, what you cannot or no longer can afford to lose, in long-term low risk Government or corporate bonds or short-term Treasury Bills. The equity portion of your portfolio is where you take risk, what you can afford to lose, in order to earn high returns. This section, comprising of business and real estate ownership for profit, is where you will spend the most time and effort, firstly in researching and understanding the key components that can affect earnings and then, in monitoring those components to guide your buying and selling activities.
Greed is a part of the human condition. After raising your own standard of living, please remember the others around you, if only to avoid becoming a victim of crime. Invest in your children’s health and education, your community’s social activities, your nations sporting programs, industry’s information exchange and solving the world’s problems.
Rationale
T.A.J & Associates Company Limited uses this occasion to comment on topics that have been covered, both academically and by the mainstream media, to add its opinion and point out investment opportunity, not to invoke any social action.
