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How Are You Spending Your Discretionary Financial Energy?

11 June 2008 One Comment

I know many people who spend time all day monitoring the stock market, agonizing over the minute by minute movements of their stocks. This can be tough to avoid given the emotional nature of having money on the line. Watching your stocks in real time isn’t a bad thing, unless it causes you to emotionally trade in and out of stocks. However, I wonder if it is the best use of time. I think there are other uses of your valuable time that are much more effective and can bring about much larger returns.

A Better Way To Invest In Stocks

Investing in stocks is a great thing. As I mentioned in my Four Pronged Financial Strategy post, an investment portfolio is one of my important components of my overall strategy. However, I encourage you to find the companies that have great long term potential. Find stocks you will want to own in six months, two years from now, and even ten years from now. Philip Morris is a an example of a stock that I want to own both now and in the future.

By finding stocks like this, you can remove yourself from the daily agony of watching the stock price fluctuate up and down. This is both a waste of time and an exercise that leads to bad investment decisions.

A Better Use Of Your Time

The best way for your to spend your discretionary energy is building a side business or a second income stream. Let’s look at the potential return of a second income stream compared to hitting a home run in one of your stocks.

For most people my age, we have limited funds to invest in stocks. Let’s look at a made-up example. Bob has $5,000 to invest. He gambles and puts all of his money into a single stock. After doing so, Bob is obsessed and follows the stock all day long, wasting much of his time. However, Bob is extremely fortunate and after a year, the stock is up 80% since the time he bought it. After a year, he made a single gain of $4,000. Pretty good, huh?

At the same time, Jim decides to invest his money into some stocks he knows have great long term potential. Jim also decides to invest his time into building an online business selling E-Books that teach people how to start a side business. It’s a slow start for Jim, and he gets frustrated several times with the lack of progress, but he pushes forward by constantly updating his product and re-focusing his marketing strategy. After a year, he begins to see some success and he is making about $1,000 a month from his e-business. The beautiful thing is that his company is operating and growing with minimal effort and after another year, he will be making $5,000 a month.

What situation would you rather have, Bob’s or Jim’s? The amazing thing about Jim’s example is that he can still earn a nice return on his stock investments but he focused his actual energy on building a cash flowing business.

Cash Flow Is King

By far, my number one priority is building a stream of cash flow in my life. Even if it is $200 a month of passive cash flow, that is a huge success.

How many people dream of making money off the internet or making money through a second side business? It’s not as tough as you think, but it takes determination. Most people give up after a slow start. Guess what? You are almost certain to have a slow start. New businesses don’t simply take off immediately after start up.

What Do You Have To Lose?

Find a business which requires minimal start-up capital. Internet businesses are perfect for this. You can purchase a domain name, get a web site up and running to sell your product or service, and read up on how to use Google AdWords to drive traffic to your site in a matter of days. Furthermore, It is extremely simple to create an LLC or a Corporation through Legal Zoom.

The best part of taking this step is that no matter what the result, whether you succeed or fail, you will have learned valuable skills. You will be poised to better succeed in your next business venture.

Your Financial Energy Is Valuable

Invest in stocks. I love the stock market. But, be cognizant of where and how you are spending your financial energy. If you have always wanted to take a stab at a side business, now is the time to make the attempt.

I would love to hear examples of side businesses that you are working on. Join the discussion by adding your comments.

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