What is the difference between money making and investing?
Money making involves a lot of time and energy, and you are expecting your activities to make you money that you didn’t have before.
Investing is where you keep your money after you’ve already made it, and it should be a mostly hands-off activity.
Watch this video, filmed at the Platinum Mastermind in the Canary Islands, where Robert Rohil presents a business vs investing quiz. For each asset class, decide whether it is a money making or an investing activity.
Your business doesn’t run itself. You have to manage the business, especially in its early stages. Later on, you can remove yourself from the operations and it becomes more hands off investment.
Until that stage, your business is definitely a money making activity, not an investing activity.
FOREX AND OPTIONS
Some people are tempted by the high returns of forex and options investing. However, they are not really investing.
To be successful with these asset classes, you need to watch the charts on a daily basis and make analysis. There is a lot of skill involved.
Being a forex or an options trader is just like running a business. It takes the same amount of time and effort. That’s why it’s a money making, not an investing, activity.
STOCKS AND SHARES
Stocks and shares can fall into either category.
If you are involved with day trading and speculating on the short term movements of stocks, it is money making. This involves as much time and energy as running a business.
However, if you are buying shares that you intend to hold for 10 or 20 years, it is investing. You can be relatively confident that over the long term, most stocks will increase in value. Buying for the long term can be a hands-off, passive investment.
Bonds are a financial instrument that gives you a fixed return. With a bond, your investment goes towards government activity and the return comes from the interest the government pays you on your investment.
Bonds fall into the category of investing, because you generally hold the investment for a long time and you don’t trade them. You can make the investment and will bring you passive income.
Real estate is usually money making, not investing.
The reason is there is a lot of upkeep. You have to manage tenants and the physical maintenance of the property. There are a lot of bills and paperwork.
Until you are very successful and you can set up a holding company where you no longer involve yourself in the operations, real estate is not going to be a passive investment.
Buying gold and silver is like buying stocks and shares.
In the long run, precious metals will increase or at least hold their value, so they make for a passive investment.
If you are speculating on short term price changes, however, it is a money making and not an investing activity.
Finally, there’s depositing your money into the bank. This is definitely investing, because it’s passive, does not require any time or energy and there’s no speculating involved.