It's Not Gravy Forever Of Investment Peaks

Scientists have been searching for a source of perpetual motion for decades - the thing that you set in motion, and it just keeps running forever. Unfortunately, this sort of thing doesn't exist in nature, and that should tell you something about your investments - they are finite, and there are definitely investment peaks to be watched for.

Nothing is forever

An investment is not something you put money into once then forget about it, and simply keep reaping dividends in perpetuity. Sure, some investments may seem that way: treasury bills, bonds and other boring, low yield investments do in fact continue to generate modest returns for quite some time, but so does bank interest, which can't really be considered investment per se - those forms of money storage don't seem to have investment peaks.

What exactly are we talking about then?

Investment peaks are nothing more than the point where an investment, be it a stock or business enterprise, has reached its earning potential for your portfolio. Call it a saturation point or a stalling out of sorts. It's the point where an investment has simply ceased to become an investment anymore and it begins to be a financial drain rather than an asset.

How can I prevent against this?

Be vigilant of your holdings and portfolio. A perfect example of investment peaks is your home - not five years ago, it had fundamentally peaked in value, reaching higher and higher until it superseded all known data or metrics in the history of American homes. After that, however, it started a slow, gradual descent - not so gradual for some people - to the point where it is worth less now than it was five years ago. Not many people can say today their homes are worth more than they were in 2007. Other investments such as businesses, stocks, or ventures behave accordingly, they don't rise for ever.

Get out your crystal ball

If you could call the peak of a stock or home price, you'd be clairvoyant. The key to watching for investment peaks is not to call the very top, although it would be nice to - the key is to set a realistic goal for an investment and then remove your money when you've achieved that goal, and do something else with it. Greed keeps us locked into declining investments long after they've reached their expiration dates. We think they'll go back up, and we end up riding them all the way down instead.

Your investment strategy needs not so much to focus on predicting the future as it does to make a detailed investment plan and stick to it, exiting from the investment when the income goal is met, and no later. Will this result in leaving some money on the table? Absolutely, but money is better left on the table than it is coming out of your pocket die to errors in judgment caused by blinding greed. Do yourself a favor and get with your financial advisor, or do it yourself if you have to, but set concrete financial goals and be well out of the investment when the investment peaks, which it most certainly will.