0:06 foreign and welcome to the way to wow people making money I am your host Kevin vamil and we are here every Wednesday 12 30 p.m Pacific Time 3 30 p.m Eastern Time an hour in for Central well Central and uh and Mountain Time hopefully I'm doing that right from your perspective and we are we talk about how to gain greater professional success start a business and build wealth and uh last week if you if you happen to catch
0:41 the show we talked about retirement accounts and this week I'm going to talk about fundamentals of investing so after you know years of working or running starting and running a business hopefully we've been able to retain uh some of the money that we've made and and and build wealth that will allow us to enhance Our Lives even if we decide to retire or maybe just to slow down in terms of our work
1:17 all personal decisions that each of us has to make uh some of us you know probably won't ever be able to stop working even if we want to others may have that choice so ideally though as we go through our professional careers our our working period we will develop a wealth develop a portfolio of Investments of some kind and that will give us more options as we get older and those those options aren't just for retirement they may include things like
1:54 travel being able to help our children being able to pursue charitable Endeavors there's all kinds of reasons why Building Wealth may be a desirable goal to have and and again just like all of the things we talk about on this show each of us has to determine what is our individual definition of success and and and where are we going to find the greatest happiness the greatest satisfaction maybe is is better than happiness
2:30 um in in this area of our lives so like I said today I'm going to talk about um some investing fundamentals and I I put together a little presentation as I often do I'm going to go ahead and share my screen here um as uh here we go slideshow play from start okay so here we are investing fundamentals um you can see our our wavy Green Fields you know Green for for money maybe I'm you know in the United States we have greenbacks so
3:06 uh you know whatever um as I as I typically do I like to just mention the basis for the show which is the three pillars of attainment and we're dealing here in the Pursuits um pillar in the finances realm and while the focus is on finances as I mentioned a minute ago our finances affect many other parts of our lives so um directly whether we can play or not
3:41 and if so how much we can spend playing and same with same with learning but it also may affect the relationships we have with our our family our friends even God and and of course it will typically have a material impact on our health our mindset and our identity so all of these Realms affect each other and and finances is is one of the most foundational and so um that's why I I typically deal with with that particular realm okay so let's
4:19 let's look at the five basic types of Investments that are out there now as we go through this I am not seeking to be absolutely comprehensive there are many types of Investments and indeed some people may categorize some Investments differently than I have uh you know this the strict uh categorization is is not really the point here the point is to talk about the different kinds of Investments that are available and
4:54 various aspects of those investments in terms of things like liquidity how quickly they can be turned into Cash risk um and and other aspects of them and diversity for example and and so that's the the point of view that that I'm going to be taking please do not take anything I say is a recommendation for any particular investment I'm it's not possible for me to do that I don't know your individual um financial situation and so it's it's
5:30 nothing I say is meant to be a recommendation for you as an individual this is for your background information to understand these if I happen to name any particular investment it's not a recommendation for that investment it's it's purely an example um and I'm gonna throughout uh seek to use sort of generic examples um so that so that hopefully you won't be you know confused by anything or or misunderstanding anything that I'm saying so the five categories we're going to talk about are the five types
6:05 are cash equivalents Securities Commodities real estate and collectibles and to a certain extent I've listed these in terms of the most liquid which is Cash equivalents to the least liquid meaning the ones that take the longest and or maybe the most difficult to turn into Cash okay now those can vary somewhat so there may be times when a particular security is
6:41 virtually impossible to sell so if there's a security of a company that's going through a lot of financial difficulties for example say I'm going to I'm going to violate my own rules so you may be reading about Bed Bath and Beyond for example so Bed Bath and Beyond has been struggling mightily and they are they've been in discussions uh internally evidently about filing for bankruptcy so the liquidity of their stock may not be very high right now those kinds of discussions could cause people to say gosh I don't want to buy that
7:18 security and so it may be harder to sell and or to sell it you may have to take a lot lower price than than you know you'd care to so so when I talk about the level of liquidity these are in general for these categories okay but any particular investment within the category may be more maybe more or less liquid than and one in another category it would depend on the specifics of that particular investment okay so let's move
7:53 on oh good it worked I think it's the thing on my keyboard and you never know if these things are going to work okay so first of all we're going to talk about cash equivalents now as you might guess a cash equivalent is something that's very similar to cash and and and very easy to convert into Cash okay so the most obvious is uh what's called a passbook account no sometimes you'll hear it called a savings account um by the way this is not a money market account that's something different okay
8:29 so I'm not talking about those I'm talking about you go to the bank and you say I want to open up a savings account and and they do that now the reason they're called passbook accounts and that that comes from a long time ago when you would literally get a little book it was about that big and they would list in it the deposits that you made and each time you went in you'd hand them your book and the money you wanted to deposit and the teller would note it in and I think initial it and and and there you go now you know how much you have in your savings account and these days the rate of return on savings accounts is still very low
9:05 notwithstanding that um interest rates have increased over the last um what year year and a half um passbook account rates remain very very low in most cases under one percent right so if we if we're working with the rule of 72 which says that you take you divide 72 by the rate of return you're getting on the investment and that that number that you're left with is the number of years it'll take to double your money so it's going to take you more than 72 years to double your money
9:42 if you put it in a passbook account right so really you know these days um there's there's not a lot of benefits to be having a a savings account I know when I was a kid savings account rates were often three to five percent um they they were you know so it was a you know a reasonably good investment especially for a kid you know I've I've got money for my bar mitzvah and I remember going to uh the savings and loan I don't remember what it's called but I remember they gave me a bank shaped like a lantern it was very cool I love that bank and I put my coins in
10:18 there and stuff and periodically my mom or dad would take me down to the savings alone and I put that in my savings account okay so so those are those are passbook accounts you can get them at Banks you can get them at Credit Unions have a similar type of account um and and and it's it takes virtually no time to get your money out of the account it's not quite a demand account which is what a checking account is a checking account is a demand deposit account meaning you can you can demand your money and it'll be given to you essentially immediately that's not an
10:53 investment that's just a place for your money to be held so you can transact so passbook account wouldn't necessarily be available to you immediately although in many cases it is but it's going to be a very very short time for you to get your money out of that account now another type of cash equivalent investment is a CD uh what's or what's better also known as a certificate of deposit and and these are basically um commercial paper it's it's sort of like a loan um that you're that you're making to a
11:30 company that issues the CDs and they have they have varying lengths of what's called maturity so you can get a 90-day CD um a one-year CD a five-year CD and and the longer the term of the CD the higher the interest rate okay and and the reason that you get the higher interest rate is because if you buy a five-year CD you have to hold it for five years to get your money out otherwise there's a penalty if you cash in the CD early okay so their cash equivalents in the sense
12:06 that they're very safe um and they're easy to turn into Cash the one thing you've got to be concerned about is matching the term of the CD to the need for the money so let's say you're saving up for a house and you want to buy a house in five years you probably don't want to buy a 10-year CD right that because you'll get to the five-year point when you need the money for the down payment and the CD has another five years to go before it matures okay so um that's the key thing about CDs these
12:41 These Days CDs also don't pay a particularly High rate of interest um but if if it's you know if you're setting aside money that you're maybe for uh like a rainy day fund or something like that and you want to kind of have a certain amount of money available to you over a certain period of time then you CDs may be um you know a good place to put that money they're very safe and um and and and essentially very liquid um okay there you go now now let's get into something um a little more fun shall we say
13:17 Securities now I'm going to talk about four types of Securities there are others okay and and I you know we could spend probably weeks talking about security so this is going to be just the the real basics of security so checking my time here to make sure I'm not going to run overtime okay and the four types I'm going to talk about are bonds stocks mutual funds and efts and options okay so bonds let's start there you've probably all heard of bonds what is it
13:54 it is simply put alone okay so if a if XYZ Corporation issues corporate bonds when you buy those bonds you're lending that company money it's just the loan is done in increments based on the size of the bond so a bond may be a fresh I mean a corporate bond typically in in denominations of a thousand dollars so if you buy 10 corporate bonds or ten thousand dollars of bonds you're lending ten thousand
14:30 dollars to that company okay and and then depending on what the term of the bond is it could be you know let's say it's a 10-year bond so at the end of 10 years you're you're you should be getting your ten thousand dollars back plus your accrued interest okay now again it depends on the bond the bond May pay interest as you go along so you may get an interest payment every year or you know in some cases depending on how the bond is is created you may um get all your interest at the end okay
15:05 so so and and bonds are issued by companies but they're also issued by governments so you may have heard of um t-bills treasury bills treasury notes and treasury bonds okay those are all instruments of the federal government the U.S federal government and the reason for the different categories is they describe the length of time that the bond has until maturity so a treasury bill is basically a loan to the
15:40 federal government for a year or less okay now the thing about treasury bills is let's say you buy a thousand dollar T bill you're actually not going to pay a thousand dollars for it you're gonna pay something less than a thousand dollars and then at the end of the year you're gonna get a thousand dollars and the difference between what you pay and and the thousand dollars is the return on your investment it's essentially the interest you get for Lending that money to the federal government okay so some
16:15 bonds like T bills are sold at a discount meaning for less than the face amount of the bond okay and your your return the profit you make on that investment comes from the difference between what you paid for it and what it's worth at maturity meaning when it's ready to be paid off okay now A treasury uh note is a mid-range investment I believe it goes up to 10 years I could be wrong on that but it's it's a midterm investment
16:50 so it's longer than a t-bill but shorter than a treasury bond and then a treasury bond is anything of a longer term than a treasury note okay now because these are um instruments of the US government the U.S federal government they are backed by the full faith and credit of the United States which means that the government presumably raises tax money Etc in order to make sure that you get
17:26 paid off so they're considered very very safe uh to the best of my knowledge the federal government has never defaulted on any t-bill t-note or t-bond okay and and that's why you will find um generally speaking they have a somewhat low interest so last time I checked for example I think the 10-year Treasury it was a little under four percent okay now by the way that's much higher than it was a couple years ago when the 10-year treasury was I think about one and a half percent or something like
18:01 that okay so because interest rates have gone up so has the rate of interest that the government has to pay on its debt okay and and just like we were talking about with CDs generally speaking the longer the term of the bond the higher the interest rate will be because of the lower liquidity that you have in a longer term bond that goes for government bonds as well as corporate bonds okay now there's a second type of government Bond called a municipal Bond okay now a municipal bond is a bond
18:37 issued by a state or a municipality could be a county a city in Louisiana a parish okay all of those are government-issued bonds okay but they are not issued by the federal government so they're not backed by the Full Faith and Credit in the United States they're backed by the full faith and credit of the municipality that issues it that's not the same thing and there have been Municipal Bond issues that didn't get paid
19:12 okay so they are riskier than U.S government bonds but generally speaking most people would consider them safer than corporate Bonds in general right going back to what I mentioned a minute ago any particular Municipal Bond might be riskier than another corporate bond so if you have a corporate bond of a blue chip company and you've got a municipal Bond of a of a municipality that's on really shaky Financial grounds so in that case the corporate bond may actually be a safer investment than the
19:49 municipal Bond it depends on the specific circumstances okay so while we will we say in general that risk the highest risk is Corporate bonds middle risk is municipal bonds and lowest risk is U.S government bonds that doesn't that does not apply to specific issues of bonds okay now when corporate bonds you have what are called credit ratings so you'll have investment grade and non-investment grader what's sometimes called Junk bonds and as you might
20:25 imagine investment grade bonds are considered safer than junk bonds right and there's there's several different rating Services um the most uh there's there's fitches there's um and I'm going up on the other two now all of a sudden um uh standards and pores and there's a third one and they will examine the financial strength of a particular company and and give that Bond a rating um it may be like AAA it may be BB Plus
21:00 or something like that there's a there's a series of them and it gives you an idea of what the relative risk is of that particular bond issue okay and certain certain investors are not permitted for example to invest in junk bonds by law okay now as an individual you typically would not have those kinds of restrictions although you might have them in certain Vehicles you would put together all of that has to be examined before you would make a decision about a bond purchase okay
21:37 um and and and and um okay so so anyway that is bonds that's one type of security the next type of security or what are called stocks or sometimes known as equities okay now again there's lots of we can get into lots of complications but basically there's two types of stock one is preferred stock and the other is common stock okay and stock is issued by a company in order to raise capital okay and they use that money for whatever purpose they're raising the capital for
22:13 it may be for expansion it may be to um uh the the people who founded the company may have stock in it and they want to monetize some of that investment and diversify their portfolio as a result so there's there's many reasons why companies issue stock NOW the thing about stock is when you own stock you essentially own a piece of the company you have that's why they're called equities because you own equity in the company unlike a corporate bond where you're a lender to that company
22:49 as a stockholder you're an owner of that company okay now we talked about the two I mentioned the two types before preferred stock and common stock so preferred stock works very much like a loan even though it's really an equity position okay and so preferred stock typically comes with a a rate of return attached to it okay and and that is the return on the stock that you get typically you don't have voting rights with preferred stock
23:25 um but in terms of the priority of what would happen if the company went bankrupt and who would get paid bondholders typically will be paid ahead of preferred stockholders okay because preferred stockholder preferred stock is inequity and bonds are a debt okay the more common type of stock or equities is common stock and when people talk about stock oftentimes that's really what they mean is they mean common stock okay and in common stock
24:01 you you not only do you own a piece of the company but you have certain rights with respect to how that company operates so once a year the company is a publicly traded company is required to have an annual meeting and at that annual meeting they will elect some or all of the members of their Boards of board of directors okay and as a stockholder you get to vote on who those people will be all right as well
24:36 you may get to vote on certain proposals okay so you'll you'll have what's called a proxy which is information on what you're going to be voting on and you'll read through it and these days you see all kinds of different proxies um it could be on some sort of executive compensation plan it could be on some kind of um um uh disclosures related to political contributions um it could be on some sort of uh Behavior with respect to
25:11 um uh the environment and or other political issues um so there's there's lots of different things happening and typically in a proxy what you'll see is what what the what the proxy what the question is that's being voted on or the issue is that's being voted on and then the board of directors will give their recommendation as to what how they they think the shareholders should vote you're not required to vote that way of course it's just their recommendation okay um but in many many cases you will see
25:48 you know directors uh recommend voting against this because it's it's putting some kind of constraint on how the company can be run and and generally speaking they don't want that constraint now again it varies so you I'm just saying I'm making a general statement any particular company that may not be the case now with um common stock there are two ways that you might make money on that investment okay one is the company May pay dividends now Dividends
26:26 are kind of like interest except that the company does not have to pay a dividend even a company that may have a long long history of dividends can stop paying them and there's nothing that the shareholders can do about that okay so if there in the news not recently this is going back a few weeks now um with uh the Disney Company um Norman Peltz and his his uh fund what they were arguing with Disney and one of
27:01 the issues that they did that Peltz was didn't like was that Disney had stopped paying a dividend and Disney was known as a stock that paid dividends for literally decades okay but even though it paid it for decades that doesn't mean next year it has to pay a dividend or next quarter does that that it's all depends on whether the board of directors decides to pay a dividend in in any particular period okay but Dividends are once one way to earn a return earn a profit on an investment of common stock the other is
27:37 for the value of the stock to go up okay so if the if the value of this if the price if you bought the stock at 20 and it goes up to 25 then you've made of uh 25 return on the price of that stock now of course it has to be adjusted if there were brokerage fees or whatever but discounting that for right now and because there's so many places where you can trade stocks for free these days without well not for free but without um paying uh you know a brokerage Commission um so so you know if if the value of
28:12 that stock went or if the not the value if the price of the stock went from 20 to 25 over over a six month period and at the end of the six months you sold it for 25 you've made a five dollar profit on a 20 investment in six months that's equivalent to a 50 annualized return okay because it only took six months to make the five dollars so it you know if they continue on the same trajectory it would have risen to thirty dollars by the end of the year and you would have
28:47 made ten dollars on the twenty dollar investment that's why I use the term annualized it's not an annual return it's an annualized return meaning you got it over a period shorter than a year but in order to compare it with other Investments we'll oftentimes look at a an annualized deal now just like the stock can the common stock price can go up it can also go down so you can lose money and that's part of the risk of buying common stock Okay so the way people make money on stocks is by you I'm sure you've heard this right
29:23 buying low selling high right that's that's the deal now you know people can try and time the market and all that kind of stuff I'm not going to talk about investment strategies today that's a that's a separate uh discussion but in order to really make money in stocks while you may make some money off of dividends typically the real money in in Common Stocks comes from Price appreciation meaning the price of the stock goes up and you're able to sell it for more than you bought it okay so that's stock that's the second type of
29:59 security then you've got mutual funds and exchange traded funds so they are not the same thing and and the reason I'm grouping them together is is because what they do a mutual fund is a company an investment company formed to buy stocks okay or bonds you can have a mutual fund that owns bonds then another one that owns stocks another one that owns both okay it depends on the objectives of the funds and there are I think at least hundreds if not
30:36 thousands of mutual funds okay now what a mutual fund is doing is it's giving an investor the opportunity to own a diversified portfolio of Securities without having to buy the individual Securities themselves okay so instead of buying 10 different stocks for example you could buy shares in a mutual fund that has 10 different stocks in it or a 20 or 30 or 50. it depends on the mutual fund okay so it gives you diversification
31:13 without having to buy a whole bunch of different stocks okay and in some cases you may be able to buy a share of a company within the mutual fund at a much lower price point than you could if you bought a share of the company directly so if you've got a stock that's priced at a thousand dollars okay to buy you know one share would cost you a thousand dollars but you may be able to buy a thousand dollars of a mutual fund and it includes that stock in the mutual fund because the mutual funds total assets are
31:48 hundreds of millions of dollars you have a teeny piece of that company okay but you still have that piece okay and that might work out well okay now the now exchange traded funds are also basically an investment company the difference with an exchange traded fund is These funds track different uh exchanges so you might have a fund that tracks the S P 500 or something or the Dow the Dow Jones Industrial uh what I think it's 30 stocks in the Dow Jones Okay so well and whereas with a mutual fund you
32:25 can you can have ones that are actively managed or ones that they buy a portfolio of stocks and and they don't you know they don't buy and sell shares within the fund with an exchange traded fund they're only going to change the fund if the index is tracking makes a change to the index which doesn't happen very often okay but what ETFs allow you to do is invest in the market overall so if you know the S P 500 goes up over a year well so then you know you're the
33:00 value of your investment is is going to go up by the same amount because you're invested across all of those stocks okay um so um you know for smaller investors oftentimes that's where you that's where they'll most likely invest is in mutual funds because it gives them the opportunity for diversity without have for to diversify their Investments without having to have you know a huge amount of money to invest whether it's you know a proper investment for you or not don't know I would have to know you
33:36 know you'd have to look at your individual circumstances um but but that's oftentimes where you'll see mutual funds used okay and finally there's options I'm actually not going to spend a lot of time on options um essentially an opportunity there's Siri she scared me um options basically are a contract to buy or sell a security in the future okay you may have heard of things critical puts and calls and and and depending on what you buy or sell that
34:13 determines what your obligations or rights are okay and oftentimes they're used to hedge other Investments so you may have a particular investment a particular stock and you're afraid maybe it's going to decline so you may you may buy some options so that if the stock declines the options will help you not lose money okay options are a very sophisticated security to buy okay it's it's not for in general I would say it's not for you know kind of the average investor um you have to be very very
34:49 knowledgeable to to do well in in options okay um I have a friend who periodically likes to trade in them he's he's a pretty knowledgeable guy and and he was you know he last time he was doing this telling me that even even as careful as he was he was making mistakes okay but I just wanted to include that in there because you've probably heard of them okay and and they are a type of investment okay something that you need to learn a lot about now I mean that's true of all Investments of course but but options can be very tricky to understand they're not as straight
35:26 forward at least from my perspective is stocks and mutual funds and bonds okay but they are another type of investment that you may uh you know you may consider as you work out your overall portfolio Okay so those are securities now let's talk about the next category which is Commodities or what's sometimes known as Futures okay now I'm going to talk about the four the four the four main categories of Commodities which are
36:01 agricultural products Metals energy and currencies okay now when you buy a commodity what you're actually buying is a contract for the delivery of that commodity at some point in the future and you're essentially betting on what that price will be what the prices you'll get for that commodity at the point where your contract is due okay and your well you may not take
36:37 um physical custody of the commodity probably won't okay you own a particular commodity or you own it like in agricultural Goods you're going to own it when it gets harvested if it's some kind of um plant or if it's some kind of animal um you know pigs or cows or whatever so you're you're you know you'll own the in essence the carcasses once they're slaughtered and ready for delivery okay um in the case of metals we're talking talking about gold silver Platinum
37:14 copper tin okay these are all um raw materials that are used typically for manufacturing okay and they're being mined and produced in many places in the world okay and uh you know just like with an Agricultural Product your own when you buy a a Metals commodity you're you have a contract for a certain amount of that metal to be delivered at a certain price at a certain point of time in the future that's by the way why they're called also Futures because
37:49 you're you're buying you're buying them at some future point in time okay by the way I I I I I have to mention this especially since I saw the movie again not too long ago back in the I believe it was the 1980s there was a movie called Trading Places brilliant movie with um Eddie Murphy and Dan Aykroyd um and uh Jamie Lee Curtis and I I can't think of the name of the fellow who plays the butler but the the sort of basis for the movie is these two Commodities Brokers have a bet about something and what's what's fun about
38:26 the movie is you get to see a little bit about how Commodities trading works so if you are interested in Commodities I I encourage you to watch Trading Places watch that movie it's it's a it's a lot of fun um Eddie Murphy and Dan Aykroyd are are terrific in that movie and you'll also learn a little bit about how Commodities work um you'll see um I I think it's actually I think they actually shoot a scene on the floor of the Commodities exchange um in New York at that time which was in the World Trade Centers um and uh and and and you'll you know
39:01 you you can just kind of get a feel for how the whole business works so um anyway that just a fun little side thing about Commodities okay because he talked about Metals energy would be things like uh petroleum natural gas uh coal these are all sources for producing energy um and and again they're they're traded just like any other commodity and then there are what are called commodity currencies these are things like the new New Zealand dollar I believe it is the South African re uh real the Brazilian peso I want to say so certain currencies
39:38 trade as Commodities okay and um people oftentimes will they may use them again in order to sort of hedge Investments that they're making in other areas okay Commodities are are like options are are one of the more complex types of Investments to make okay um I I had a business associate back when I had my real estate company 30 years ago he loved trading Commodities and he would typically lose his shirt
40:15 every time he did it and candidly I have never invested in Commodities it's it's just not my my thing I don't know enough about it to be effective investing in it um but I it it is a a fairly common um investment and it is out there and there are people who know the the uh business or this type of investment very very well and they make money in it and and this may be something that you find interesting and if so you know again dig in learn as much as you possibly can about it
40:50 um before you would make any Investments and also you know get some advice is this really the right thing for you to be investing in Commodities can be very very risky um for for a whole host of reasons um Commodities generally are impacted by an international marketplace nowadays so you know oil is an international market um I was listening to someone on the radio earlier today and he was responding to somebody saying that if you if you buy if you use a gas heater
41:25 um you are in essence supporting the war against Ukraine because Russia produces gas and he was saying well but if I'm using my gas heater in America and the gas is bought in America so I'm not using Russian gas that's not exactly correct because the market for these Commodities is international and although there there may be sanctions on a particular supplier like Russia still whatever gas Russia gets out onto the market affects the worldwide market price okay so to a certain extent
42:00 Commodities are somewhat fungible meaning just because you know you you're you say you're only buying from this Source but that still affects the worldwide market and affects how much money uh you know another supplier will get so they're much more complex I think than than most of us really consider and unless we sit down and and really start working our way through what all of this means okay but again with the commodities might be might be good for might be appropriate for you might not be
42:36 something for you if you're interested to check out and really dig into it okay next is real estate so those of you have seen the show before you know I had a long history in the real estate business and uh real estate for many people this is essentially all the investment and I'm not going to invest in Securities or any other stuff I want real estate because I can go there I can see my investment okay fine um that you know that's fine um real estate may be a good investment
43:12 it may or may not be appropriate for any particular investor it just it just depends on what their financial assist situation is what their investment objectives are what kind of opportunities are available to them and and many other factors Okay so I've listed here four of the most common types of investment real estate okay we're not when we talk about real estate as an investment not talking about your personal residence okay that's not an investment not really
43:49 that's where you live you may make money off of owning a personal residence but presumably the reason you bought that house was to have a place to live okay and and while in California people seem to think that there's I don't know a god-given right that their house value is going to increase even here in California that is not the case and there are a number of markets Nationwide now who have seen price declines over several months on residential housing so uh you know that that's not really an
44:24 investment in in in in the in the terms of what we're talking about here now that's not to say that Residential Properties cannot be an investment they may be you may buy a house for investment purposes but you would buy it typically differently than you would buy the house to live in especially to live in long term okay so houses can be an investment that you maybe you're going to buy the house fix it up rent it out okay and get the rent from it or or you're going to fix it up turn around and resell it at a
44:59 profit so-called house flipping you know you see all those shows about it on what is it HG Network or whatever it is okay so they can be an investment and a lot of people start by investing in a house because it's generally speaking the least expensive type of real estate to buy okay and then from there oftentimes they will move to residential income I.E what's also known as multi-family could be anything from a duplex to uh you know thousand unit building okay um to a certain extent they they work
45:35 the same okay now you have what are called residential one to four meaning a one a house or a condominium up to a four unit building or a four Plex those are treated differently than five plus units and the reason is because of how the government supports the financing of buying those types of properties so residential one to four has a particular uh type of financing available that is not available for five units and above
46:10 okay and generally speaking the interest rates on loans for one to four units are lower than interest rates available for five and above and also the percentage of money you can borrow on residential one to four is higher than on five and above okay so there is that break there but in the end residential residential income look you're you're buying a place where people can live they pay rent um generally speaking they're paying a gross rent meaning they write you a
46:45 check and you're paying for maintenance oftentimes for at least a part of utilities um you're paying the property taxes you're paying the insurance okay and all of that comes out of your rental income and then you if you've borrowed money which typically people do so then you're gonna make pay your your loan payments and whatever you got left that's your cash flow and that's the return on the cash portion of what you invested okay so um like I said many people start their real estate investing with residential okay but there are other types of
47:22 properties to invest in there is commercial now commercial has several property types within it so you could have retail which could be anything from a little strip commercial center to a shopping mall and and other things in between okay you can have office okay Office Buildings and again there's lots of types of of Office Buildings so you can have just your typical little you know small ten thousand square foot maybe it's a single user office building or even 5 000 square foot you could have a high-rise office building like um but the Empire
47:59 State Building right it's a huge office building but it's for general office use there's Medical Office Buildings there are um uh um office building campuses that are almost a hybrid between office and and and Industrial okay so there's there's many different types of Office Buildings and um as you might imagine coming out of covid office buildings are one of the areas that has struggled the most you'll also hear different quality of Office
48:34 Buildings so you'll hear Class A Class B Class C so Class A as it sounds like is the highest quality office building okay Class B is is kind of a mid quality and Class C is low quality and these days it's it's you know the the the new class A office buildings with very high amenities Stills in general seems to be doing pretty well okay but when you start getting down into class B and Class C A lot of those properties are struggling in some cases they may
49:09 have obsolescence issues meaning they're they're outdated for what tenants want these days okay so with Office Buildings it's not monolithic just like it is not monolithic within retail centers okay so office retail commercial those are those are some of the categories under this overall umbrella of commercial real estate okay then you have industrial real estate and again there's lots of different types there's hardcore manufacturing where you know like like where you're manufacturing these like automobiles
49:44 okay then there's light manufacturing where maybe your manufacturing uh out boys or something like that okay or where you're there's high-tech manufacturing okay then there's also Cold Storage where um food products that need to be kept cold meat Seafood are kept then there's just regular Warehouse like you know what what a company like Amazon might hold okay and then there are different r d type industrial buildings okay where they may have clean rooms by the way they could have clean rooms in a
50:20 manufacturing facility as well okay so there's lots of different types of industrial properties as well okay and and overall industrial properties have been doing pretty well um Coming especially through during the pandemic because so much of shopping shifted online and so um um companies like you know Amazon and Walmart they were fulfilling orders out of their warehouses instead of their stores well Amazon has very few stores but in any event more more and more Warehouse was was being used
50:56 um they're they become larger uh taller um with with uh computerized cranes and all that kind of stuff the days of when you had you could only build a warehouse as high as as a forklift could lift something up or gone because you you can have computerized cranes that you can have an operator sit at a terminal and just you know punching things and the the crane goes and pulls the thing off the shelf and brings it down to the loading dock and bang There you go so they're very very sophisticated these days um quite quite interesting I I used to when I was in the real estate business
51:31 before I did a lot of work in industrial real estate it was one of the most enjoyable things um that I did because it was so varied um and and you were seeing a lot oftentimes seeing things mean seeing things being built so um now by the way industrial also would include things like Lumber Mills mineral processing facilities so that's that's industrial type um real estate as well those can be difficult to deal with you may have uh issues of contamination and those kind of things that have to be
52:06 worked out but all of that falls under the rubric of industrial real estate okay and then finally the other type I'm going to mention is Hospitality um this is hotels motels um Resorts so it's it's places where people go for entertainment and relaxation um entertainment centers may not necessarily fall within Hospitality that may be more of a commercial retail use these days some of the categories are not as as distinct as they used to be but hospitality is also a big big area
52:42 in real estate investing um and and and it took a big hit of course during covet it's it's come back pretty strong more recently okay and then there are other types of real estate so these are the four that I just chose for to talk about today there are other types there's um special use properties um casinos for example um I used to I used to work on casinos um trying to think of something else uh some kind of weird thing oh Port facilities that's a special used property so there's there's other types
53:18 of real estate invest pop real estate that's you know that people invest in um land of course Farmland Timberland is has become a a big uh real estate investment type recently for environmental reasons so there's there are other types out there um besides what I've listed here and and again um just like with all the other types of Investments it's going to depend on what your objectives are what your financial situation is whether real estate is the right investment for your not and by the way you may there's
53:54 there's different ways of investing in real estate you can invest directly by owning the property yourself you can invest as a partner you can invest in something called a Reit which is actually a security that a read is a company that owns real estate and then sells Securities based on its portfolio basically so there's lots of different ways to add real estate to your Investment Portfolio depending on what's appropriate for you and all of that should be taken taken into account before you would make any decision about investing in real estate so uh I've got to look at my time here yeah we're
54:29 coming up um on on time here so I want to get to the last one real quickly I'm not going to talk about this a lot but I did want to mention it because there are some interesting things happening in Collectibles or so-called hard assets so art coins and stamps wine especially investment grade y memorabilia sports memorabilia comic books all that kind of stuff so they can be good Investments okay now um if you're I wanted to talk specifically about art um because typically art was something
55:06 only the very wealthy could afford to invest in like I was I'm trying to remember what I I don't remember what artist it was I want to say Chagall maybe recently or they're anticipating that a couple of chagalls are going to sell for 80 million dollars 100 million dollars that could be off but I mean huge huge number like you and I are we're not going to go buy a Chagall okay recently there have been some apps that have come out where at a much lower price point people can
55:41 invest in art and they'll have access to those kind of Investments on essentially a shared basis that they wouldn't have before so there is some some of that going on these days that may make this asset class available to a larger group of investors than historically was the case so as technology develops and grows and changes so will the opportunity for Investments okay and and and one of the
56:16 areas where that's having an impact is in Collectibles okay the other thing about Collectibles is they're fun I I mean I have a collection of wine although it's not really this is not in I don't have investment grade why um but I have a I have a collection of wine I have a collection of coins and stamps and memorabilia I mean the main books as well the main reason I have them is because I enjoy them I like looking at them or reading the books or drinking the wine whatever um but you know often oftentimes that's where people start and then they get more serious and
56:52 they get much more investment oriented in these Collectibles okay so and if if there's something you have a passion about maybe that's an area for you to investigate as a potential investment okay gosh we're coming right down to the wire here so so those are the five types of five main types of Investments now of course there are other types of Investments I didn't even mention today and and you know they're LA and they're all kinds of hybrids like I was talking about real estate investment trusts you know things are getting more and
57:27 more uh sophisticated more and more complicated um investment promoters are always looking for new ways to package Investments that can make them more accessible to a larger number of people can make them more sophisticated can make them safer all of these things are happening and and so this is why before you make any investment you want to be educated you want to get professional advice and and you want to make sure that whatever it is you're investing in is appropriate for your situation okay and as always if you have questions
58:02 comments whatever here's I'm showing up here on the screen here's here's my my contact information um and it'll be in the show notes as well if you have any thoughts you want to share with me if you want to take issue with anything I said feel free I will I will do my best to respond quickly um but it's I think it's good to know the fundamentals of investing so that as we make money we can build wealth as well and here's all the you know all the legal stuff just want
58:37 to show this real quickly bang that's the end of that and then that's over and here let's stop the sharing we'll go back into the room here we are and uh we're coming up on uh on our hour together being done so I I want to thank you for joining me and we will talk more about investing we'll talk more about wealth building we'll talk more about how to build our professions how to build a business in the coming weeks I have some great guests coming up so please plan to join us every Wednesday at 12 30 p.m Pacific Time 3 30 p.m
59:13 eastern time and also I have a second show now on Tuesdays 10 30 a.m Pacific Time 1 30 p.m eastern time that show is business lessons from the military so what I'm doing is going through different sources of military Doctrine great leaders military history free and Distilling from that knowledge and wisdom that we can use to help run our businesses better and be more successful so I invite you to join me the
59:49 boy Siri is just she's just really active today I invite you to join me on Tuesdays for a half an hour it's a shorter show okay um and and you can join me live keep out keep keep an eye out for um the emails or go on Eventbrite um and find the way to wow show on Eventbrite you can always get a free ticket there if you want to join me live in this room and ask questions or you can watch on social media on uh YouTube on Facebook Twitter and Linkedin
60:24 um all of our various social media channels so thank you very much for joining me today I hope you found this useful and and and it'll inspire you to look at Building Wealth as you pursue your your your progress in the finance Realm of the Pursuits pillar of attainment and that just leads me to acknowledges I always do in signing off my dear dear friend up in heaven Marie darling you are still my bell and I hope I'm still your bow thank you again for joining me and we'll see you next week