A Return of your Investment or a Return on your Investment?

Sometimes I think people that I've encountered from a day to day perspective get the two mixed up as they are so anxious to start their "investing," the priorities can are not clear. 

An example would be buying an unstable investment that would be here today and potentially gone tomorrow or a real estate where the property value is currently high but lacks fundamentals for stable growth or even price stability and might go down. 

This example was evident in areas in Inland empire CA where values sometimes dropped as much as 75% from 2006 highs while in Orange County Irvine CA values dropped around 25% from 2006 highs and regained the 2006 highs by mid 2013 while most areas in the Inland empire are still a shadow of their 2006 highs till this day.

It's my opinion there should be a portion that a person reserves that they cannot afford to lose (savings) and a portion that should be allocated to grow towards further aspirations (investments).

For the purposes of this article savings will be accounts you can keep money relatively safe and won't lose more than 1-2% value Net or will grow stably. Even 100% guaranteed accounts at 1-6% have to deal with inflation loss so its possible to lose a bit of money through purchasing power while numerically the numbers in your account have not changed.

For investment purposes the definition will be accounts or assets that are speculative in that they may return much more but there is no guarantee and a chance of loss of your contribution always exists now and into the future.

It really depends on what allocation between debt and equity and what rates of return allow you to still feel comfortable given your time frame, goals, and knowledge of that particular investment subject matter. Since not every paper investor has the knowledge, networks, resource, & skills like William Buffet or every real estate investor skills like Donald Trump.

Each day I get to help balance cash inflow/outflow, debt/equity, and how risks are managed so I am blessed to be able to contribute in a topic I am so passionate about. 

Here are some areas for capital preservation (some better than others) " A return of your investment ":

- Cash

- Commodities

- CD's and cash like instruments

- Cash value life insurance structured correctly

Here are some investment asset classes "A return on your investment":

- businesses

- paper

- real estate

Certain asset classes above offer insurance protection, control, liquidity, competitive returns, and protection while some only have some of the advantages.

A good balance is key.