Posts Tagged‘money’

Have Money, Want Content, Will Spend.

I spent the better part of my youth pirating nearly every bit of software I wanted. It’s not that I was doing it on principle, no it was more that I didn’t have the cash required to fuel my insane desire for the latest computer hardware, software and everything else that I had my eye on back then. Sure you can argue that I should have just gone without instead of pirating but in the end they were never going to get money from me anyway. For those software and games developers that did make a decent product they’ve since received a well paying customer in the form of my current self who spends lavishly on collector’s editions and any software that he needs.

One area I’ve never paid a dime for (although I happily would, as I’ll explain later) is TV shows. I was a pretty big TV watcher as a kid, even going to the point of recording shows that I couldn’t watch in the morning (because I had to catch the bus) so that I could watch them in the afternoon. As I discovered the wonders of playing video on your PC I started to consume most of my media through there as it was just so much more convenient than waiting for a particular show to come on at a certain time. Australia is also quite atrocious for getting new shows as they’re released, usually coming to our shores months after their release to the rest of the world, if they do at all. However whilst I might be able to get everything for free it’s still somewhat of an inconvienence, especially when I see a service like Steam that has no replica in TV in Australia.

It’s not like these services don’t exist either. The USA has things like Netflix and Hulu that stream TV shows to users and the latter will even do so free of charge. From a technical standpoint there’s no reason why these services can’t work anywhere in the world, they’re just another set of packets travelling alongside all the others. However both of those services employ heavy geo-fencing, the process by which anyone connecting to it is identified by region and, should they be outside the USA, be blocked from viewing the content. Primarily this is because of licensing agreements that they have with the content providers who want to control which content goes where. For places like Australia however this just leads to people pirating the content instead of watching it on TV or buying it in stores, something I’m sure they’re not entirely happy about.

This issue came up recently when a bunch of ISPs got together and proposed a new system to deal with copyright infringement. On the surface it looked like long time supporters of privacy were caving under pressure from rights holders but it’s actually anything but. More its an idea to make the discovery process more open and focuses on educating the end users rather than punishing them. Whilst I don’t like the system proposed I did like the fact that they recognised rights holders needed to do a better job of providing content to Australia residents. The fact of the matter is many turn to piracy for the simple reason that they simply can’t get it anywhere else. A service like Hulu in Australia would be wildly popular and would be as good for the rights holders as Steam was for the games industry.

Steam has shown that convenience and service are what drive people to piracy, not strictly price. Of course Steam’s regular fire sales have made sure that people part with more cash than they usually would but the fact is that they deliver a product that’s on the same level of convenience (sometimes better) than the pirates do. Right now rights holders are still delivering products that are less convenient (and sometimes, even worse overall) and so the piracy option is far more attractive. I know this is asking a lot of an industry that’s feared technology for the better part of a century but in the end the problem doesn’t lie with the pirates, it lies with them. 

Microsoft Buys Skype: Solving Some of Their Mobile Woes.

Microsoft has a few ways it goes about building out a presence in a market. The first, and the most rare, is that the develop a product in house from scratch to compete directly in a market that’s currently booming. The most recent examples of these sorts of products are the Xbox and the Zune both wholly developed by Microsoft to compete in the gaming and portable music player industries respectively. The second way they establish themselves in a market is to buy out either the top competitor or one of the more successful competitors as they did for things like Softricity who were the leaders in application virtualization software. Lastly sometimes they’ll say they’re getting into a market but will never make any serious attempt to do so just to kill off any potential competition, which they attempted to do back when the iPad was still a rumor and they announced the Courier tablet which failed to materialize.

Whatever strategy they adopt to establish themselves in a chosen market there’s always one common theme to their approach: throw money at the problem until it becomes successful. Now this isn’t a strategy that every company can adopt (realistically only a minority can) but Microsoft is usually so flush with cash that they can afford years of losses without it posing any sort of risk to their core business. Most notably they did this for a good 7 years with the Xbox division before it managed to turn a profit, sinking billions of dollars into the product before it actually made them any sort of money. They also continue to do it for products like the Zune which continues to languish behind Apple’s iPod but that’s still got a couple years before it reaches the 7 year mark that the Xbox did, but there’s really little hope for that product.

Their latest endeavor which is seemingly flush with cash is their Windows Phone 7 product. Whilst the sales of the devices haven’t been that stellar they’ve still managed to take a small percentage of the smart phone market. Their partnership with Nokia sets the scene for them to become a potential juggernaut in this sector but they’ve got a long uphill battle ahead of them and the gamble isn’t a sure thing for either side. Microsoft now appears to be looking to strengthen their WP7 offering even further by shelling out a cool $8.5 billion dollars for everyone’s favorite communications app, Skype:

The deal is doneMicrosoft is buying Skypefor $8.5 billion in cash in its first sizeable acquisition since August 2008, when the Redmond software giant spent $486 million onGreenfield Online.

In fact, this is Microsoft’s biggest financial bet to date in terms of M&A, trumping its $6 billion+ purchase of aQuantive, which dates back to May 2007, in size.

The purchase price includes the assumption of Skype’s debt.

The agreement has been approved by the boards of directors of both Microsoft and Skype.

Whilst the acquisition is not solely dedicated to the WP7 product line it’s still the one that has the most to gain from it. WP7 doesn’t currently support any form of video calling like Apple’s FaceTime or Google’s Video Chat does and Skype could provide a good chunk of the underlying infrastructure, saving Microsoft a lot of work. Skype’s vision of being available everywhere lines up quite well with Microsoft’s three screens idea and I’m sure they’ll be looking to leverage Skype’s vast network to push their cloud products further. Still one has to wonder if the $8.5 billion price tag they paid for Skype is worth it, considering its Microsoft’s biggest acquisition to date.

When I first heard of the news that Microsoft had bought Skype my first reaction was that this was a maneuver to deny Facebook the chance at getting it. There were rumors of Facebook testing the waters of an acquisition for a while but it seems that in the end the only serious bidders were Microsoft and Google. It then becomes clear that Microsoft simply did not want the Skype network in the hands of one of its largest competitors and Facebook was probably not that interested in the first place, especially if Microsoft (who owns 1.6% of Facebook) was going to pony up the cash for them anyway. Google might not have been completely serious about their offer anyway since they already have most of what Skype has to offer and might have just been making sure Microsoft spent more than it had to (hey they’ve done it before).

It will be interesting to see how Microsoft leverages this investment, especially with its current product lines that have direct synergies with Skype. They’ve certainly been doing all they can to make sure their mobile sector succeeds and if Gartner is to be believed then we’re less than 4 years away from them becoming the dominant platform. I’m not so sure about that idea but I do know that Microsoft does have the resources to throw at this problem until they become big in this sector, and the Skype acquisition is a testament to that fact.

Salaries, Skill Shortages and Market Economics.

Over the weekend I was fortunate enough to be involved in a piece for the Canberra Times on salaries in the ACT, thanks wholly to my journalist friend who set up the connection.  Whilst the online version doesn’t show me in it (you’ll have to buy the paper for that!) the main thrust of it was that, for men at least, the highest paying industry you can be in is ICT. Whilst my part was merely to put the human element into the story it got me thinking about my career to date and why the IT industry in Canberra has been so lucrative over the past half decade or so. As far as I can tell it’s a local phenomena to Canberra thanks to a few obvious factors.

I’ve always been interested in computers but when it came time to choose my career I wasn’t really looking to end up where I am now. By training I’m technically an engineer and by rights I should’ve been seeking jobs in embedded systems or at the very least a software engineer role. It wasn’t for lack of trying however, after languishing on a help desk for a year and a half I finally struck out at my first programming job, applying for a junior developer position at the Australian Treasury Department. Funnily enough I actually got that role although instead of taking it I foolishly used it as leverage to get a similar job at my current work place. That of course was an unmitigated disaster as I was put into a team that didn’t want nor need me and less than 6 months later I jumped ship into my first system administrator role.

After making that jump the prospect of taking a massive pay cut to be an actual engineer didn’t look so appealing.

In fact the next few years saw me go on a roller coaster ride of several jobs in the IT industry. It wasn’t because I couldn’t hold a job down or I got fired for incompetence, more it was that I found people were more willing to pay market rates for new hires than they were to promote someone internally. The reason for this was simple, there’s has always been a shortage of skilled IT people in the Canberra area. The reasons behind that are twofold: all government departments have their head offices (and therefore the majority of their IT infrastructure) in Canberra and the population here is just over 350,000. This means it’s a seller’s market here when you’ve got skills in IT and it has been for the past 5 years.

Realistically it’s just another example simple economic principles in action. There’s a relatively fixed supply of skilled IT workers in Canberra and in order to increase that supply they have to make it attractive for people to consider making the move. The first, and usually primary, motivator for most people is base salary and when you’re competing against private industry in other states the wages have to be comparable for people to consider making the move. Over the years this quickly put the average IT wage well out of the reach of normal APS brackets and thus we saw the birth of the contractor industry in Canberra in order to keep the level of skills required in the region. There was of course the dark times when the Gershon Report was in full swing which kept the IT market down in Canberra for a short period of time but it rebounded with renewed gusto the second people realised work wasn’t getting done.

However I strongly believe that this is a local maxima, focused tightly around the Canberra region. Put simply the factors involved in driving IT salaries up just don’t exist in the same concentration outside Canberra as every other major city has a higher population and much smaller government presence. This doesn’t mean IT isn’t worth anywhere in Australia outside of Canberra, far from it. IT skills are amongst some of the most portable talents to have as nearly every industry in the world relies on IT for critical business functions. If you’re really trying to make the most of the IT industry in Australia (and you’re not an entrepreneur) then you really can’t go past Canberra, especially as a starting point.

Why Mobile Gaming Isn’t Killing Other Platforms.

I remember my first mobile phone well, it was a Nokia 8210 that I got myself locked into a 2 year contract for mostly because I wanted to play snake on it. After having the phone a month (and subsequently having it stolen) I grew tired of the game and resigned myself to just using at it was intended, as a phone. This continued with all my following phones for the next few years as I favoured function and form over features, even forgoing the opportunity to play old classics like Doom on my Atom Exec. However after picking myself up an iPhone early last year I started looking into the world of mobile gaming and I was surprised to see such a healthy games community, grabbing a few free titles for my shiny new gadget.

Primarily though I noticed that the vast majority of games available on the App Store were from small development houses, usually ones I’d never heard of before. Whilst there were a few familiar titles there (like Plants vs Zombies) for the most part any game that I got for my iPhone wasn’t from any of the big publishers. Indeed the most popular game for the iPhone, Angry Birds, comes from a company that counts a mere 17 people as its employees and I’m sure at least a few of them only came on since their flagship title’s release. Still the power of the platform is indisputable with over 50 million potential users and a barrier to entry of just one Apple computer and a $99 per year fee. Still it had me wondering though, with all this potential for the mobile platform (including Android, which has sold just as many handsets as Apple has) why aren’t more of the big names targeting these platforms with more than token efforts?

The answer, as always, is in the money.

Whilst the potential revenue from 50 million people is something to make even the most hardened CEO weak at the knees the fact remains that not all of them are gamers. Heck just going by the most successful games on this platform the vast majority of Android and iPhone owners aren’t gamers with more than 80% of them not bothering to buy the best game available. Additionally games released on the mobile platform are traditionally considered time wasters, something you’re doing when you don’t have anything better to do. Rarely do you find a game with any sense of depth to it, let alone does such a game strike it big on the platform’s application store. Couple that with the fact that no mobile game has gotten away with charging the same amount as their predecessors on other platforms has and you can start to see why the big publishers don’t spend too much time with the mobile platform, it’s just not fiscally viable.

For the small and independent developers however the mobile scene presents an opportunity unlike any they’ve seen before. Whilst there is much greater potential on other platforms (The Xbox 360 and Playstation 3 both have user numbers rivalling that of the iPhone and Android platforms) the barriers to entry for them are quite high in comparison. Microsoft, to their credit, has reduced the barrier to the same level as the iPhone ($99/year and you bring your own console) but thus far it has failed to attract as much attention as the mobile platform has. Other platforms are plagued by high investment costs for development such as any Sony or Nintendo product, requiring expensive development consoles and licenses to be purchased before any code can be written for them. Thus the mobile platform fits well for the smaller developers as it gives them the opportunity to release something, have it noticed and then use that to leverage into other, more profitable platforms.

I guess this post came about from the anger I feel when people start talking about the iPhone or Android becoming a dominant player in the games market. The fact is that whilst they’re a boon for smaller developers they have nothing when compared to any of the other platforms. Sure the revenue numbers from the App Store might be impressive but when you compare the biggest numbers from there (Angry Birds, circa $10 million) to the biggest on one of the others (Call of Duty: Black Ops $1 billion total) you can see why the big guys stick to the more traditional platforms. There’s definitely something to the world of mobile gaming but it will always be a footnote when compared to its bigger brothers, even when compared to the somewhat beleaguered handheld, the PSP.

Microsoft’s Social Network: Curiously Absent?

There’s no question now that the hot thing for any company to do is to make some kind of software that has a social component to it, and why wouldn’t you. If your product is based around friends (and not really friends) interacting with each other then the marketing really does itself, so long as your product is somewhat useful or novel. It’s getting to the point where once a service has been around for a while they will inevitably either integrate with Facebook or build in their own social networking components, usually to keep driving the user numbers upwards. No company seems to be immune to this, even my fledgling little application allows you to login via Facebook, except for one: Microsoft. Despite the social revolution that seems to be rampaging on around them Microsoft has quietly kicked back letting others duke it out for social supremacy. For a company that’s renowned for throwing money around in order to gain market share in pretty much every IT related area their silence on the social scene is quite eerie, verging on the point of them knowing something the rest of us don’t.

For the most part their strategy seems to have been one of going along with the current trend of integrating their products with the current social giants. Their MSN Messenger product was just recently updated with a new beta that had Facebook integration. Already it’s garnered a healthy 4.6 million users or approximately 1% of Facebook’s user base. That might not sound like much but considering that it’s still in beta and the current incarnation of the Live product has well over 330 million users you can expect that a lot of people are going to be getting their Facebook fix from Microsoft. Additionally many Outlook users would be familiar with their new Social Connector which is in essence a social network for businesses and has been getting some traction due to its integration with Sharepoint and the Office suite of products.

Still there’s no Microsoft Social Network (MSN? Ha!) to be found, so what’s the deal?

Part of the answer would seem to lie in the past. Rewind back about 3 years and you’ll come across a flurry of articles speculating on a bidding war between Microsoft and Google for a piece of the next hottest thing: Facebook. Surprisingly enough Microsoft won out in the end managing to secure a small share of the company for a cool $240 million, or 1.6% stake. This was a continuation of the relationship that they had established previously when Microsoft secured an advertising deal with Facebook just one year earlier. Still it was an odd move for Microsoft as the investment was peanuts for them (They had over $23 billion in cash on hand, yes cash) and realistically even if the company went to IPO and they got a 10x exit from it you’re still only looking at $2.4 billion dollars for a company who turns that over in about 2 weeks, so it was more a foot in the door than anything else. Their recent integration activities with Facebook also shows that they’re more keen to work with them rather than try to push them out of the market.

Strangely enough it looks like Microsoft actually did try to compete with Facebook all those years ago. I’ll admit I didn’t know about this when I first starting writing this post, I came across it in my research, but it appears that in response to Facebook going open to all back in 2006 Microsoft retaliated by launching their own site Wallop:

Seattle-based Microsoft Corp.‘s (NASDAQ: MSFT) spin off Wallopsaid Tuesday it was starting service. It’s a site intended to compete head on with MySpace and Facebook. Wallop starts with $13 million in backing from Microsoft, Norwest Venture Partners, Bay Partners and Consor Capital.

Considering that I’ve never heard of this site it’s not surprising that it never managed to get off the ground. Checking out the wiki page on the service it appears that they left their lofty ambitions behind back in 2008 instead focusing on developing applications for social networks rather than trying to compete with them. This it would seem is the reason behind Microsoft’s curious lack of a real social network. They tried, they failed and then realised that there was more to be done with them than against them. This really is contrary to their normal kind of behaviour and I’m sure there’s an ulterior motive to this that I just can’t figure out.

Taking a wild stab in the dark I’d say that they just don’t think they can take the shine off Facebook’s crown. Microsoft really isn’t the kind of company you expect to make products and services like that, they’re more of an underlying services platform that will deliver those products to you. Considering this is where their main revenue line is drawn from it’s not surprising but it’s still one of the first times where it looks like Microsoft has just thrown in the towel and capitulated to the competition. It will be interesting to see how this maneuver pays off as Google starts to ramp up their efforts in the social space with a rumoured Google Me service starting to make waves on the Internet. I still think Microsoft will hang back on that one too, but there’s every chance they’re waiting for the market to segment a bit before attempting to jump back in to the social networking scene.

Web Standards: They All Have Their Agenda.

It really should come as no surprise that anything a large corporation does is usually done in their best interests. By definition their existence is centered around increasing profit for their respective shareholders within the bounds of the law and operating outside that definition will in turn make your company not long for this world. Still we manage to suspend disbelief for certain companies which have qualities we aspire to but make no mistake they are in the end driven primarily by motives of profit. Nearly all other secondary activities are conducted to further their primary directive, even if on the surface they don’t appear that way.

Take for instance the current web standards warthat’s brewing between Apple and Adobe. Whilst both companies would have you believe that their stance is the only answer to the problem the fundamental issue that they face is not one of ubiquitous web standards, more it is about control over the future of the Internet and who will be the dominant player. I’m on record as stating that Adobe will win out thanks to its current market penetration and support from many big players. It’s no secret that Google is more on Adobe’s side in this war than Apples, as a recent post from one of their (well their subsidiary) employee states:

There’s been a lot of discussion lately about whether or not the HTML5 <video> tag is going to replace Flash Player for video distribution on the web. We’ve been excited about the HTML5 effort and <video> tag for quite a while now, and most YouTube videos can now be played via our HTML5 player. This work has shown us that, while the <video> tag is a big step forward for open standards, the Adobe Flash Platform will continue to play a critical role in video distribution.
It’s important to understand what a site like YouTube needs from the browser in order to provide a good experience for viewers as well as content creators. We need to do more than just point the browser at a video file like the image tag does – there’s a lot more to it than just retrieving and displaying a video. The <video> tag certainly addresses the basic requirements and is making good progress on meeting others, but the <video> tag does not currently meet all the needs of a site like YouTube:
All of the points Harding make add quite a lot of fuel to the fire in the whole web standards debate. He’s quite right that the current version of HTML5 does not (and most like can not) provide the features required by sites like YouTube. As such there will always be a need for plugins that fill the functionality gap between the web standards and what is technically possible. The more rich the standards are the less requirement there is for plugins but as it stands right now the features provided by third party plugins are almost a necessity for a lot of sites on the Internet and it will be a long time before the standards catch up.
However if you read on you’ll see that YouTube’s apprehension to switch over to a full HTML5 based site is fueled not only by lack of features but also because their bread and butter, videos, still lacks agreement on some core components. One of those is the codec that will be used as the standard for all content used with the <video> tag. Usually you would go with the most popular codecs out of the lot which is currently H.264. The problem with that codec is that, while it is currently royalty free, it is encumbered by a number of patents held by a consortium of companies. This poses a problem for browser developers as it means eventually they will have to pay fees to implement the video part of the web standard, which doesn’t really fit with overall vision of the HTML5 standard. Google of course has their own open codec VP8 which they’ve garnered support for which brings us full circle back to my original point: they’re only developing it to further their bottom line.
Ultimately it will be the market that decides the winner out of all this. Web standards will always lag behind what Internet enabled devices are capable of and that will mean there will have to be third party plugins to bridge the gap. Whether that gap is bridged by Adobe, Apple or some other company remains to be seen but so far the market still seems to side with Adobe as the vast majority of sites (including this one) make use of Flash in one way or another. Many sites will still go to the effort to make their content more accessible to mobile devices (like this one!) but in the end we’d still have to do that even if Apple ends up losing the war on Flash.
I guess what I’m trying to say is: if a company tells you they’re doing something that seems to be for your benefit ask yourself what they have to gain from doing it. In the end you’ll notice that they will be benefiting from it far more than you ever could.

Any Excuse Will Do. (Or Oooooh Shinies)

If there’s one thing (amongst a never ending list) I can thank my parents for is the spend thrift mentality they instilled in me. Whilst there were a couple glorious years where they let me run rampant on their dime it soon came to a halt when they announced “We’re not letting you spend anymore of our money”. Being a direct problem solving child I instantly retorted “Then I need to my own money” and no less than a month later I was in my first job which I would hold for 6 years, and I was then in charge of my own cash. After the initial spending spree that all kids go through when they start earning some decent coin I began to realise that my time had a certain value and this translated directly into the things that I desired.

The initial line in the sand that my parents drew came from my ever increasing interest in technology and all the wonderful expenses that come along with it. Back then the upgrade cycle to keep up with most modern games was still around the 12~18 month mark and mobile phones were starting to become all the rage with us teenagers. I’d also had my eye on several other gadgets like my mini-disc player and the Playstation 2. My meager retail wage barely covered all these extravagances and many times I saw myself sans my debit card as part of a loan deal with my parents. Over time however I learnt that keeping a healthy amount of savings allowed me to have what I wanted instantly and my spending habits were changed forever.

In the 10 years since I first started working the technology hungry teenager in me really hasn’t changed. I can still lose hours browsing through online stores and forums, seeking out the latest and greatest product that might suit a particular need I have. I’ve also developed an unfortunate taste for things that are far, far beyond my current means like private jets and space travel making any cash that I might put away burn a hole in my pocket that much faster. Thankfully due to my many years as a poor, tech hungry youth I’ve steered clear of running myself into untold consumer debt, but that hasn’t curtailed my desire at all.

You see I’ve known for a while that anything I’m doing I’m probably doing it for the tech. Looking over all the things I’ve acquired over the years they all some connection to an underlying desire for new technology, save for the gym equipment (although I admit I did eye off a few bits until I realised a barbell was sufficient). One of the saving graces has been that whilst I usually eye the top of the range first I almost always work my way down to the best bang for buck, leaving the tech geek in me satisfied and my wallet just a little less horrified.

Thinking about it this morning I realised that even my current projects provided a convenient excuse for me to rack up the gadget purchases. Geon, with its need to be on as many platforms as I can handle, has already landed me an iPhone but is also paving the way for at least 2 more handsets and possibly one or more tablet devices (read into that how you will :P). Sure I could test everything on an emulator but really there’s no substitute for the real deal. My other yet unannounced projects are paving the way for a refresh of my photography equipment and some additional bits of home entertainment equipment. Yet again many of these started out as just general ideas which have then manifested in me tracking down some gadget that then becomes a must have to begin or further the project. I can’t imagine how I’d be coping if I wasn’t an IT contractor.

You can imagine then that me making any kind of purchase is a bit like a game of cat and mouse. I’ll get all excited about buying something but will almost always not buy it on the first day I think about getting it since I’ve got to make sure I can justify the purchase in some way. I think the projects are becoming a shortcut to bypass this internal logic check on my purchasing habits because it’s not really for me, it’s for the project. It’s already managed to bypass my stance on Apple products¹ so there’s no telling where it will take me now. Hopefully before it gets too out of hand I’ll be spending venture captial money rather than my own. ;)

¹Honestly I never really had that much against Apple products, they just never suited my needs. Whilst it might look like my current stance has done a quick 180 thanks to the iPhone (and soon MacBook Pro) it’s more been that I now have a use for them. Had fate swung the other way I’d probably be rocking an Android phone and some Dell XPS monster of a laptop.

Money Money Everywhere But Not A Cent To Spend.

I’m often asked about what’s the best way for people to invest their hard earned dollars so they can have their money work for them. I’d love to say I’ve coached people to make their fortunes out of the stock market or property investments but that’s just not the case. Typically I get as far as asking what their end goal is for investing and never hearing back from them. So today I want to give everyone some ideas and a bit of a framework so that you can go out into the wild blue yonder of investing and make proper decisions about what you want to achieve.

After many long night shifts working at one of my last jobs I ended up stumbling across a few good sources of investment information. The forums are filled with hundreds of people who are either looking to invest or are already well on their way to their financial goals. I spent many of the long 12pm to 7am drag reading through all the articles and asking all sorts of silly questions until I finally came to the conclusion that I needed to approach this just like any other project. The first step is to scope out your requirements.

So what’s the end goal for investing? For myself it’s to build up an asset base that will eventually replace my income and will also give me a lot of leverage so I can maximise my return. A lot of the time people tell me “I just want to be rich” but what that lacks is a real end point where you can call success. I’ve seen people often get too frustrated at not seeing any results early on and giving up on the investing game completely, that’s why it’s important to know your goals and set milestones so you can track your progress.

Let’s take a generic example that’s based off what I want to achieve:

  • Time frame: 5~10 years
  • Risk profile: low to medium.
  • Goal: passive income of approximately $150,000/year (in today’s dollars)
  • Chosen investment vehicle: property for asset base, managed funds or high yield shares for revenue

So the first thing you need to decide is how long you want to be in the game before you achieve your goal as this affects what investment vehicle you should choose. Property is a medium to long term with shares, managed funds, etc are more geared to short to medium term investments. However there’s exceptions with both these rules so you can make a quick buck with property (usually done through “flipping“) and there are many shares which mimic property trends (bank stocks are a good example of this).

Once you’ve decided your investment term the next thing to decide is how much risk you’re willing to take on. Risk is a complicated term especially when it comes to managed funds as it doesn’t mean exactly what most people think it means. For example, a lot of revenue geared managed funds (basically high interest savings accounts) classify risk as the potential for them not to make the targeted yield, whereas risk in direct share purchases is more aptly described as the potential for the stock to lose its value. A general rule of thumb is investments like shares and managed funds are medium to high risk with property being in the low risk area. Again there are exceptions to these rules (as we’ve seen recently) but you can usually guage risk by the return or yield the investment offers. The higher the return, the more likely it’s a risky investment.

Now for the juicy part, where do you want to be at the end of all this? Do you want to replace your income so you don’t have to work? Are you building a nest egg for retirement? Do you have your eye on a Bugatti Veyron and can’t get the finance with your current assets? This is the idea that will drive you through your investment and will be the base of your financial plan.

So for someone like me who is risk adverse, in it for the long game and is looking to leverage as much as he can property was the best investment for me. Once I’ve got my asset base up I’ll be shuffling money into managed funds or similar to get my revenue up, as property is a great leverage tool but not the best for revenue generation. Depending on your situation many of the other options out there might be the best thing for you. So, as always, have a look around at the vast options and use the 3 basic ideas I’ve described here and you’ll be well on your way to financial freedom.

This post does not constitute financial advice and is provided as is with no guarantees, warranties or support. Seek professional advice from a registered financial advisor before undertaking any investment decision.