What Constitutes a Good Investment
I have always enjoyed investment as a topic of conversation. People's views on the topic are so vast and it amazes me that even among those that are considered to be professionals at the topic can still be completely contradictory. I have heard more than one person say a new car is a terrible investment as it losses so much value upon purchase. I have also heard many arguments for new cars being great investments as they help keep you out of repair shops, generally have better fuel economy than older models, and not having a reliable mode of transportation makes it hard to focus on anything else in life. Now I have never owned a new car, largely because I tend to side with the first group of people on the topic. I am no expert on investing but I have made some purchases that I would consider to be great investments.
So what determines whether something is a good investment? The widely accepted response would be something that either increases its value beyond the purchase price or saves money that eventually outweighs the initial expense. Retirement funds such as 401K accounts, stocks, and real-estate are all great examples of typical investments but investing is not limited to such a narrow group.
When I was young my father once told me that the greatest investment he ever made in his life was the pair of hair trimmers my mother used to cut both his and my hair. The local barber charged $11 for a simple hair trim so at $18 dollars the trimmers had paid themselves off and saved him $4 by the time she had finished cutting both our hair that night. Expand that out to the fact we got a haircut about every other week and after the first year, his $18 dollar purchase had saved him $528. That is a 2933% return on investment in the first year alone. A number you would be hard-pressed to achieve playing the stock market.
The one accountant and retirement fund manager I have told that story to, wrote me off on the fact there was additional labor required which makes it not a valid investment. I would love to hear them explain that to anyone who has ever flipped a house. But as a response to that labor comment, I would present the argument that one of the best investments the average person can make before they graduate college is to purchase a pair of bowling shoes. (Bear with me)
When I was a student at Kansas State University the Union bowling alley had $2 games for students on Tuesday nights. Erin and I would go about once a month as it made for a date that was overall both fun and cheap. Two games of bowling each and a large drink to share left us exactly $10 poorer than we were when we came in an hour and a half prior. At least it would have if it wasn't $4 to rent a pair of bowling shoes. Now Erin comes from a family where bowling is closer to a religion than a recreational activity so she already had a pair of shoes, so I was the only one out the 4 extra dollars. Luckily I didn't need an engineering degree to do the math to figure out that if we were going to keep up that trend it made sense for me to upgrade my wardrobe. By the time I had graduated college the $24 I spent buying my bowling shoes was already paying dividends.
Most people's feet stop growing by the age of 20. Clothes don't expire so as long as you take care of them and can afford a little bit of space to store them they are good for a certain number of uses. I usually wear out about one pair of tennis shoes a year so let's use 300 uses as our benchmark just to be conservative. If we assume shoe rental at the union was a little high (which in my experience it wasn't) and go with $3 per rental then the lifetime saving of the shoes is $900. Now I know you can buy them cheaper but let's say you want a little flasher pair so you spend $50 buying bowling shoes. That is a potential return on investment of around 1700%. Now if you are like me and Erin we go bowling about twice a year any more so it is going to take more than my entire life to get that whole return but I can also guarantee that rental prices are going to go up before I need to get new bowling shoes again.
It is not an investment you can retire on and if you only go once or twice a year it probably doesn't make sense unless you have a little spare room in your closet but I hope this made you think about something that you have invested in that made you happy. Maybe sometime I will tell you about the actual best investment I have ever made in my life. Until then though I hope this post has found you in good health and of a sound mind. I am just another confused father from Kansas wondering ...
What are you invested in?