Fourth of July Lessons

If you’re an American, you’ve probably just finished celebrating Independence Day.  Hopefully, you managed to have a nice picnic filled with friends, family and fireworks, none of which caused you any permanent injuries.  Personally, I had a great time with my fiancee, watching her shoot off some fireworks, and generally having a fine celebratory time.

Of course, being the personal finance geek that I am, I couldn’t help but come up with some money lessons from the holiday experience.  There’s plenty you can learn from holiday experiences that you can apply to your investing life, as well.  For example…

Stay Safe

The first rule of working with fireworks is to be sure that you stay safe.  Don’t stand over the fireworks while you’re lighting them, stand back once the fireworks are lit, and be sure to dispose of any remanents in a way that won’t allow them to relight on you.  If you follow all the rules, you’ll be safe and secure as you celebrate the holiday; if not, you could end up winning a Darwin Award (that is, dying in a unique and creative way, so named because you are helping the human race to evolve by taking your genes out of the reproductive flow).

Another way to take yourself out of the gene pool.
Another way to take yourself out of the gene pool.

It’s the same with investing; be careful and ensure that you are prepared before you start, or your investments could end up blowing up in your face.  Being sure you have an adequate emergency fund, safe and steady investments in your retirement funds, and house purchased (if you want) before you try to do anything flashier.

Start Small…

If you’ve ever seen a fireworks display, you know that you don’t start with the huge, flashiest fireworks right away; instead, you start with the smaller, more subdued fireworks and work your way up to the big stuff.  It builds excitement, allowing you to get worked up for the more extravagant fireworks yet to come.

It’s the same with investments; you don’t leap right into complex options strategies or elaborate forex trades, you start with stocks, bonds, and mutual funds holding those investments.  You’ll build a solid investing foundation, making it less likely that a bad speculative bet will completely ruin your finances.

…But Add Some Pizazz (If You Desire)

Still, you might want to go a bit beyond the simple sparklers and small displays; sometimes, you just need to shoot a big rocket into the air, something that can be seen for miles.  If you make sure to take all the needed precautions (and your state allows you to use such fireworks; always follow your local laws, boys and girls), these can make an excellent finale, adding some pizazz to your celebration.

It’s the same with speculation in your portfolio; you can add excitement to your investment mix (and possibly increase the amount that your investments earn) by including some speculative bets in your investment mix.  You need to take the proper precautions, making sure that you invest only money that you can afford to lose and still meet your financial goals, and that you limit the possibility of losing more money than you actually invested, a potential risk with some forms of speculation.  You also have to be ready, willing and able to keep on top of your speculation to make sure that it doesn’t get away from you.  Keep all these cautions in mind, and speculation can make your portfolio that much more ‘explosive’.

Enjoy Your Family

The most important part of any holiday (at least, in my not so humble opinion) is being able to spend time with your family.  Holiday time is time for my extended family to get together, which is always enjoyable for the whole family.  It’s a worthy lesson for investing, as well; while earning more money is always good, it’s what you do with the money, spending it to allow your family to enjoy life.  Keep in mind the ultimate goal of investing and other methods of earning money: to make life more enjoyable.  If you do, you’ll have a much better time in life.

Happy Fourth of July, Everyone!  (Especially my Yakezie friends; the first stage of the Yakezie challenge is over, now the next stage can begin!)

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