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.