Wednesday, November 24, 2010

Purchase or Investment?

From a reader: “Ohhhh! The marketers have been working overtime on a friend of mine. We were talking about something he had recently purchased, and he must have used the term investment no less than 10 times when he was considering his purchase.

If something one purchases is designed to solely depreciate in value, it is not an investment! One is not "investing" but rather "consuming."

From my point of view, there are two criteria which must be met to call something an investment:

1. It has a chance of appreciating in value.

2. The owner is willing to sell, and there is a market with willing buyers (barring a market collapse).

This frame of mind goes along with the "you deserve it," or "you have earned it." Maybe I have, but do I need it?

What other tricks do we use to fool us into justifying a purchase?”

For starters, we have a vocabulary problem when it comes to the words NEED and WANT. We also have a calculation problem when it comes to the word BARGAIN and TRUE COST. Unfortunately, we also possess a perception problem when it comes to advertising, marketing, and just plain “being sold.”

The biggest problem we have today is with reading comprehension—especially when fine print is involved. Unfortunately, this doesn’t quite fall under the realm of purchase vs. investment.

You are absolutely right, my dear reader, when you say that an investment is not a solely depreciating asset. An investment should ideally make money FOR you, as it is intended, rather than do nothing but lose its monetary value through depreciation. Buying something that doesn’t increase in value, or ever will, is indeed standard, garden-variety consumption.

Sales people try to use this word as persuasion to get you to spend money on an item that really isn’t anything more than stuff. The word “investment” makes your purchase seem more valid—more important—and therefore, justifiable. This word is used to get you over the wall of resistance (and right into the frying pan of buyer remorse).

Next time you hear the word “investment” tacked onto the purchase persuasion of a common ordinary item, ask yourself if that item would ever make money FOR you one day by increasing value while in your possession. If not, then correct the person slinging that word around carelessly, then remind him or her that E-bay (or even yard sales) usually decides the final value for all things salable. Value guide books don’t exist for much else but vehicles and monetary instruments—everything else is decided by the highest bidder.


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