Maximizing Investment Opportunities for F.I.R.E

Once you understand the philosophy of F.I.R.E. and start taking concrete steps to achieve it, you will notice numerous opportunities around you for investment. This is also the stage referred to as flexibility, as discussed in the “Self-Sufficiency to Financial Abundance” post. Depending on your risk appetite and available funds to invest, there are several ways to put your hard-earned money to work. With the advancement of technology, some forms of investment have become extremely easy, such as buying stocks. People make investment choices based on several factors, such as the ease of acquiring an asset, the required investment, the timeframe for returns, the expected return rate, and the effort needed to maintain the asset. This makes investing in certain asset classes extremely easy. For example, not only can you buy stocks from anywhere within a minute, but You can even buy fractional stocks, eliminating the barrier of minimum investment. In terms of ease of management, many people prefer purely passive investments, such as investing in someone else’s business or through syndicates. This frees people from any maintenance or management; however, it takes away 100% control to make any decisions if things do not go as promised. In conclusion, every investment has its own set of positive and negative aspects.

There is another important consideration that people often overlook when making investment choices, which is called leverage. In its simplest form, leverage is the ability to maximize the capacity of your investment. This often stems from the ability to take advantage of other people’s money rather than putting one hundred percent of your own money at risk. The majority of investment classes do not utilize leverage. For example, buying stocks would require you to have the entire money upfront (to keep things simple, stock options are out of the scope of this discussion).

On the other hand, if you want to buy real estate, you are not required to have 100% of the value of the property. You can easily find a lender to provide you with a mortgage of up to 80% of the property value. In this case, leverage not only allows you to acquire an asset five times your capacity, but the payments remain fixed for the entire tenure. That means if you’re real estate appreciates rapidly, you can end up building a significantly significant asset. This is just one example, and leverage is not limited to real estate. Other examples are building a business by getting investment from others. When considering an investment next time, be sure to examine the potential for leverage, as this can be a great way to grow your wealth quickly.