How To Invest Money - Percentage Return Versus Dollar Return

So I guess everybody is waiting to see where do I begin and how do I start. I'm going to go so simple its not funny today! Hopefully you will be educated enough to 'spot out' the people who knows what they are talking about and the other people who THINKS they know what they are talking about in terms of how to invest money!

What is the difference between Percentage Return and Dollar Return? And which one should you care about?

Lets step through an example using stock trading...
You think you are smart and you made $1,000 on a trading a stock over night and you brag about it to your mates because you think you know how to invest money like the pros do! You bought $40,000 worth of stocks and returned a hard cold $1,000 and you are feeling like a hero.

Now, I'm new at investing and have less money than you. I did my research, done my paper trading, followed my plan and invested my $10,000 and it returned $500.

Question is... Who do you think is a smarter investor? and actually made more money?
You'll be surprised that most people think making $1,000 using $40,000 is better than making $500 using $10,000! If this is you, STOP what you are doing and understand this!

1,000/40,000 = 2.5% return
500/10,000 = 5% return (This guy is clearly the HERO)

If you are asking why then you need to read this slower!

If both person had the same amount of money say $40,000.
Person A will return $1,000 which is 2.5% return
Person B will return $2,000 which is 5% return

Just because you have more or less money doesn't make you a zero or a hero! How to invest money begins with getting the most return with the money that you have. Obviously if you have more money (assuming you can get the same return the next time) then you will make more money!

Its that simple. Next time when you are talking to your mates about investing and they say they made $10,000 on one trade. What you should do is ask him how much of his own money did he use to make that $10,000!

Percentage Return is about how much return you get for the money that you put in
Dollar Return is the dollar value you return regardless of how much money you invested

Listen to the people who know how to invest money, don't waste your time with people who are chasing the 'glorious' kill/win so that they can show off.

How to Invest Money - Money and Value

Have you ever stopped to wonder why you pay somebody

• $4-5 for a cup of coffee?
• $100-200 for a pair of shoes?
• $1,000-3,000 for a computer?
• $20,000 - 40,000 for a car?
• $200,000-500,000 for a home?

This is an important question because we can figure out how to invest money based on where value is. Think about it, how come a computer with the state of the art technology is worth $1,000-3,000 and a house which is just bricks, mortar with a roof, some doors and windows is worth $200,000-500,000?

The answer to the question comes down to value... i.e. how much value is derived from each item of good or services? Very interestingly is actually how much perceived value is actually created between two parties.

How is value created?
Here is an example for you. Recently I purchased a memory card for my phone, I first checked the internet find the 'market price' of the memory card. The price range from varies internet stores was about $30-40 and $5-10 for postage and handling. In my mind, I could buy the memory card for about $35-50 and it takes about 3-5 days for delivery to my doorstep. I browsed a bit more and the stores selling it at the cheaper range were all out of stock so the real market price that I would be looking to buy is around $40-50

That same day I was doing some shopping and walked passed an electronic store so I decided to walk in and see if they have the memory card I wanted and of course they did. It cost $70 and I decided to buy it.

Why did I pay $20-30 more for something?

• I was impatient and didn't feel like waiting 3-5 days
• I can use it immediately
• Don't have to worry about the credibility of the store and quality of the goods
• I didn't have to give my credit card over the internet to a store I didn't really know

Thats how that local store made my money, its because it created value for me and to me, the time saved was more important than the extra $20-30 I paid.

This happens all the time around you in life, think about ebay, when you go shopping, hiring the services of a gardener, accountant, lawyer etc.

Money is create by the value that you add to the other party. Where and how to invest money depends on where we think the value is added for us.

How to Invest Money - What is Money?

I guess when we talk about how to invest money, the first thing we ask ourself is... "what is money?" Depending how you answer this question you may or may not struggle through life.

Some common answer are:

• money is a mean to and end
• money is a tool
• with money, i can do whatever i want with whoever i want, where-ever i want and whenever i want
  
• money is what makes the world go around
• money is freedom
  
• money causes greed
• money is the root of all evil
• money isn't everything in life
  
• people with money most probably stole it
• money doesn't buy you happiness

I can write a list that will never end... but I will stop here. Have a good read over the 10 points and ask yourself what you truly believe is true and ask yourself the question why.

Hopefully you will have more green points than red points. You may ask why? and the simple answer is that making money is the easiest thing in the world, keeping it is what most people don't do correctly. The strategies on how to invest money is only 20% of the picture, the other 80% is psychology! If your brain is telling you that you do not deserve the money, then your brain will subconsciously lose your money for you (ie. forcing you to spend it all, give it away, make bad financial decisions etc)

I'll go through some of the negative points and explain a bit more

• money causes greed... I know a lots of poor greedy people, what about you?
• money is the root of all people... people are evil, having money only make you more or less evil
• money definitely isn't everything in life, but having money does help you live your life the way you want it
• money is created when value is created, the reason you paid for it is because you value it... there is nothing stolen only time saved
• i rather be a rich sad person than a poor sad person

I hope i'm making some of you uncomfortable, because it means its working and that you are learning something. Fear/discomfort etc. are all good things is a way your body is telling you that change is about to come! So be prepared!

Stay tuned for more lessons on how to invest money

How To Invest Money - Introduction

Over the past year I've notice that many people do not know what to do with their money and that just amazes me! More recently friends and also strangers have been approaching me asking me the question, "How to invest money". The one thing I noticed is that everybody is at different level of financial literacy and the most important part is obviously the foundation of how to invest money.

I dream to enlighten everybody reading this space and hopefully inspire you to take action and increase you financial literacy. I only can wish that one day, everybody will step up, take massive action to learn how to invest money and contribute back to their community or pass it forward to their family and friends.

Stay tuned and learn about how to invest money!