Melissa Myers, CFP®

(231) 733-1166

What's A Good Investment?

What's A Good Investment?

| February 27, 2019
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I've been asked many times, "Melissa, what's a good investment?"

The simple answer:  One that makes you money.

I'd add, One that you understand.

Additionally, One that you get a Return on Your Investment (ROI).

The bottom line is that the investments you make should be suitable for you and your situation.

Considerations Before You Invest


Is the money you intend to invest, money that you plan to live on or leave on? 

Earlier in my career, I worked in the investment division of a regional bank.  After a bank customer would hear the bank's money market and CD rates from a banker, they would often ask me for my best rates.  I'd reply, "That's a good question.  May I ask you a question?"  What I would ask is, "What's your purpose for this money?"  It was a question that many hadn't considered.

To help them get clear on what they would eventually do with the money, I'd ask them if they intended to live on the money or leave the money [to their beneficiaries].  Once they were clear on how that money would be used, we'd go through my process of determining a suitable recommendation.

Live-On or Leave-On money?  Want clarity?  

Schedule your FREE 10 minute call with Melissa today.  Go to:

Time Frame

When will you need the money you're investing?  

It's best to avoid investing money in an investment that doesn't allow you to have your money back when you want it.  Some investments are liquid, meaning you can sell them at any time and get your money back in a relatively short period of time, typically a few days.  Other investments are considered illiquid which means you can expect to wait to get your money back.  For example, if there are restrictions on when you can sell or if there isn't a ready buyer, the investment would be considered illiquid.

Your age is a consideration.  Certain types of investments come with a penalty if you access them before a certain age, typically 59 1/2.  Other investments require you to keep the money invested for a certain number of years before you can access it, or move it, without a penalty.

For investments that are subject to volatility, it is important to have enough time to ride out potential market downturns.  

How will you use the money you're investing?  

Let's say you've determined that the money you're looking to invest is "live-on" money.  The next consideration is how you'll actually use the money you're investing.  Will you eventually sell the investment and redeploy your capital as a lump sum for a major purchase, like a car, second home, business or for a life event like a wedding or college tuition?

If you don't have plans to use all or part of the investment as a lump sum for a major purchase, what else is there?

Are you planning to live off of the income from the investment?  Do you want to supplement your other sources of income in retirement?  Do you want to have more income while you're still working?  

If you aren't yet sure if the money is for a future expense or as a supplement to other income sources, that's ok.  You can invest simply to grow your assets and net worth until you have a specific purpose or it goes to your beneficiaries upon your passing.

How Much Money Can I Afford to Invest?

That is a great question!  My Money MattersTM program will help you become clear on what's reasonable for you based on your current financial situation and your goals.   If you are up to your eyeballs in debt, have no emergency fund, and don't have sufficient insurance in place, you aren't ready to invest yet.

Build your financial foundation so you're prepared to make investments in the future.

Start now.  Schedule your FREE 10 minute call with Melissa.

One way to invests is my investing a set dollar amount on a recurring basis.

How much money do you have available after your expenses?  Not sure?  Cash flow is where you start.  Look at how much you have coming in, how much you have going out and what's left over.  Start investing your extra money on a regular basis by setting up a systematic transfer

Want to invest more?  Take a look at your spending history.  What expenses could you reduce or eliminate to free up money for investing?

Are you sitting on a large lump sum of money?  Large lump sums can be from the sale of another investment, the sale of a property, as accounts are consolidated, upon retirement, or when a settlement or inheritance comes in.  

Regardless of how you plan to invest, it's important to make sure you have a solid financial foundation in place and that the investment you are making doesn't create undue risk for you and those for whom you're responsible. 

Want to find out how much you can afford to invest?  

Schedule your FREE 10 minute call with Melissa today.  Go to:

Tax consequences

Always seek the advice of a tax professional before investing as tax codes change over time.

Be prepared to pay taxes when you make money and understand that you'll either pay now or pay later.  

A "pay later" type of an account is generally some type of account intended for use in retirement.  When you invest money into a tax-deferred account, you're investing money that you haven't paid any tax on yet.  You'll be taxed on the amount you invested and the growth, at ordinary income tax rates, when you take it out.  Take it out too soon and you can face a 10% IRS penalty plus the tax due.

A "pay now" type of an account is generally an account you have access to regardless of your age.  You invest your money that you've already paid taxes on.  Generally you pay tax on the growth portion when you sell the investment.  Even if you don't sell you could get a 1099 for capital gains distributions.  In these types of accounts the growth is taxed as capital gains, which under current tax code is a lower rate than ordinary income tax rates.

There are exceptions to these generalizations including Roth IRAs, Insurance proceeds, and tax-free bonds.  

Want to know more?


A Good Investor

Know Thy Self

A good investor knows him/her self.  Those seeking a quick return or chase get rich quick schemes will likely encounter disappointment when it comes to investing.  There's no such thing as a perfect investment and there are always trade-offs when it comes to making money.  

Hassle Factor

Consider how much "hassle" you're willing to put up with in order to make the money you hope to make.  Do your research.  For example if you're considering getting into rentals, ask an experienced landlord about the problems with residential real estate rentals.  Ask yourself how you would feel about having to deal with an eviction.

Many people dream of being self-employed.  Ask a self-employed person about their challenges.  Could you handle what they've experienced?

If you invest in stock market based investments will you drive yourself nuts with worry about what the market is doing?  Have you heard that you can make a ton of money by day trading or getting into options?  Are you willing to do what it takes to be responsive to sudden market moves?  You might need to be glued to your computer.  Is that for you?

Panic Button

People used to say that you couldn't lose with real estate.  Then we experienced the housing crisis.  There are risks to all investments including real estate.  

Without consideration to the fundamentals, it is common for inexperienced, nervous investors to sell their investments simply because they went down in value.  Investing in securities that go up and down in value takes patience and a strong stomach.  You have to know at what point you'd hit the "panic" button.  

If you'd sell out of your investment because it lost even one cent, you either should avoid investments that are subject to market loss or you need more education about investments.  

Consider how much your account value would have to drop before you would sell.  Think about the change in value both from a percentage as well as a dollar amount.  There is a correlation between time and the level of aggressiveness that an investor can have when it comes to their asset allocation.  However, emotions pay a role too. 

If your asset allocation reflects only your time horizon and not your tolerance for risk, you'll end up buying high and selling low.  You'll do the opposite of what a prudent investor does, which is:  Buy Low, Sell High.

What is an appropriate asset allocation for you?

Call Melissa today to find out!

(231) 733-1166


You've probably heard someone say about another, "She's a good investor."  Or, "He invested wisely."  I believe anyone can make good investments.  It just takes patience, knowledge, discipline and money.


Patience is a virtue.  You have to be patient before you've even invested.  Patience is required to find the right investment at the right price.  You don't want to over pay.  What you're looking for is a sale.  

Trying to get a deal doesn't mean you should try to time the market, but waiting for the market to go up and then investing will cost you money.  This applies to any investment including securities, real estate or business.

Chances are that during the time you own anything, there will be a period of time where it goes down in value.  Be patient.  If the fundamentals of the investment are good, it will go back up.  Resist the urge to sell just because you see it went down in value.  Remember that you haven't locked in any losses or gains until you actually sell.

Knowledge and Understanding

Ask good questions.  There are many questions to ask.  Here are a few...

  • Why is this a good investment for me?
    • Cost
    • Expected Return
    • Liquidity
    • Volatility
    • Taxes
  • How does this investment fit into my overall financial plan?
  • What are the pros and the cons?
  • What surprises should I be prepared for?
  • What aren't you telling me?
  • What else should I be asking?


Avoid putting all of your eggs in one basket. 

When have different types of accounts and different types of investments you reduce risk.  The more you are diversified, the less risk you have if you were to experience a partial or total loss.  If your entire nest egg was invested in a single stock and that company went bankrupt (Enron and Worldcom) you would lose your entire nest egg.  The more companies you have ownership in and the more streams of income you have, the more you reduce your risk. 

You increase your diversification by having different types of investments and accounts:  Retirement and non-retirement accounts, personal and business or trust accounts, equities, fixed income, real estate, businesses, alternative investments, and annuities are all places you can put your money and reduce your overall risk.

If you want to learn how to further reduce your risk by diversification---let's talk.

Schedule your FREE 10 minute call with Melissa today.  Go to:

Reserves for unknown events

A "rainy day" stash is essential.  You can't predict emergencies.  This applies to personal and business situations.  You don't want all of your money "tied up" in an investment or investments.  Some money needs to be left on the sidelines, accessible for the unknowns that happen.

In addition to an emergency fund, I'm a big fan of designated accounts into which money is added on a regular basis to be available when needed.  Some people refer to this type of account as a sinking fund.  For example, I have an account that is designated specifically for costs associated with vehicle maintenance and repair, insurance and eventual vehicle replacement.  Each month I systematically transfer money into that account drawing off of it ONLY for the reasons it was established.

Designated Accounts/Personal Sinking Fund Examples

  • Vehicles
  • Property Taxes and insurance
  • Home maintenance and repairs
  • Vacation
  • Christmas Club or Gifts
  • Clothing

I advise against investing for these types of accounts due to the potential short-term need along with the potential to lose value due to market volatility.  I recommend that sinking funds be set up in accounts like bank checking, savings or money market so that they aren't at risk of loss.  

The other recommendation is to keep the accounts separate, specific to the intended purpose.  Co-mingling the accounts into one can create problems of perception.  It's a common mistake to look at the balance, especially as it gets larger, and overspend leaving too little for another need as it arises.  You might see a large balance and justify a more expensive vacation or vehicle than you would if you were using only dedicated funds.

If you have just one account for these purposes, keep a ledger of the account balance AND for each category.  Add and subtract as money comes in and goes out for each category so that you have current balances for each category.

Not sure HOW to set up your sinking fund?

Contact Melissa today!

Types of Investments

  • Securities
  • Real Estate-as a security and/or physical real estate
  • Insurance/Annuities
  • Businesses
  • Commodities

It is important to understand the account and the associated implications for accessibility, taxes, transfers upon your death, as well as the actual investment itself.  A CERTIFIED FINANCIAL PLANNERTM Professional will advise you as to the type of account and the actual investments that are appropriate for your situation.

Wondering what you should ask when interviewing a CFP® Professional?

Here's your list of questions:

10 Questions to Ask

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

No strategy assures success or protects against loss.

There is no guarantee that a diversified portfolio will enhance overall returns or out perform a non-diversified portfolio.  Diversification does not protect against market risk.

Always seek the advice of licensed and qualified experts for tax, legal, securities, insurance and real estate matters.

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