Fixed income investments are great.
In fact, you could build a system of guaranteed cashflow via a pool of fixed income investments.
However, the fact is, fixed income investments are limited in nature and are specifically recommended for beginner investors.
Why So?
The truth is, professional investing is risky.
Most of the pro investors making it big today have spent so many years in the industry, going through a steep learning curve, making mistakes, and learning what it takes to invest professionally.
Safe to say, becoming a professional investor isn’t just about learning to invest your cash. It also demands that you invest time, knowledge, and resources towards building capacity.
Many of the wannabe investors today do not have the required time or resources to develop their capacity for high risk investors. Hence, they largely settle for fixed income investments.
A House vs A Hotel
The first time I played the “Monopoly” game, I was perplexed that a player could choose to sell six of his residential houses to buy a hotel.
“What? Why sell six properties to acquire just one property?” I asked.
It just didn’t make sense.
But the secret is in the numbers.
All things being equal, the financial output of one hotel is way more than six residential properties.
In fact, the daily financial output of a hotel could be equated to the monthly financial output of a residential property.
Risk vs Revenue
Now, it is important to note that the comparison between a hotel and a residential property is not just at face value.
While the revenues from a hotel could dwarf that of a residential property, the associated risk is significantly higher.
There are more regulations guiding the operation and management of a hotel than those guiding that of a residential property.
Also, there is significant risk with dealing with the public in hotel management on a daily basis. Anything could go wrong, and the investment could be lost.
That is why most beginner investors would choose to invest with a residential property rather than a hotel, even though the cashflow is significantly less.
Risk is Proportional to Capacity
Risk in itself is not bad.
The question is how can you handle or manage risk as an investor?
Do you have financial controls in place?
Do you have the required financial intelligence and experience?
Would you rather deal with the associated risk of an investment in return for higher income or would take the lesser investment to avoid risk?
Why Fixed Income Investments Are Popular
The truth is that the vast majority of investors are beginner investors. This constitutes the largest number of investors with a significant pool of funds.
Hence, there are several investment vehicles made available to cater for these investors.
Also, most high level investments are hidden away from the public. They are mostly reserved for accredited investors with the right amount of network and fund.
That is why they are mostly called private equity funds.
A Fixed Income Investment Is Not A Bad Start
Since fixed income investments are for beginners, it’s a great way for anyone looking to start a career as an investor. Fixed income investments give you the room to develop your knowledge of investments and take risks on a small scale.
With fixed income investments, you could find your perfect investment niche, find what works for you and plan ahead for the future.
It is way better to have your funds stached in a performing fixed income investment than have it lying idle in your bank account.
Want More Bang For Your Buck?
If you want more interest on your money than a fixed income investment, then you need to build your capacity to manage risk.
A mentor used to say, “In business, greed is good” but you have to pay the price for that greed.
If you want more performance for your fund or capital, then you have to pay the price in developing your knowledge and skill in managing high-risk investments.
How Badly Do You Want It?
So, what’s your plan?
How badly do you want to grow your capital?
Would you rather stick with fixed income investments that come with significantly lesser risk and more stability, or are you willing to break the limits and turn on your investment speed train?
The ball is in your court.