Forget about stocks, forget about 401k, and forget about real estate ventures. Pets are the most expensive investment in your portfolio. No one retires off of their returns but science shows that the gains from pet investment are high if you have what it takes. Like any investment, pets are not for everyone and even if they are right for you, knowing the kind and quantity is the key to success. Before you take the lunge and add a four legged friend or a furry pocket pet to your portfolio do your homework and make sure you have what it takes to succeed in the market. The following will provide you with some insider information to help you make an informed decision.
Does this investment match my investment goals? Why is this investment suitable for me?
Unlike stocks or mutual funds, pets will require a continuous and constant carrying cost. Time is the most valuable asset any of us have. It is the most limited resource and is the reason why we receive a paycheck every two weeks. By committing 80 hours of our time to a company every two weeks we are rewarded with a paycheck. With that in mind, let’s look at the pet investment.
The average household income in the United States according to the U.S Census Bureau was $48,201.00 in 2006 which roughly translates to about $23.00 an hour. In the first year of pet ownership, you might spend anywhere from $2,000 to $6,000 for purchasing the pet stock itself, food, vet bills, training and so on. In addition to your actual spending, you need to dip into the largest asset, time. A new pet requires a lot of your free time during that first year and has a constant time demand every year after. Again, some pets require more then others, but in the end, all pets require attention. On the very low side, if you spend 3 hours a day with your new pet, seven days a week, in one year that would equate to $25,116. Add in your out of pocket expense of on average $4,000, you will find yourself spending $29,116 a year on your pet investment.
These assumptions are of course per pet share you purchase. If you already own one pet and are thinking about getting another, these costs are exponential. So ask yourself, are you in a position to invest $29,116?
How liquid is this investment? How easy would it be to sell if I needed my money right away?
If you are asking yourself this question, chances are pets are not for you. Much like your retirement investments, if you buy a share of furry friend it is a life long investment.
Let me illustrate the major difference in the liquidity of this investment. If you want your IRA or 401k early, you can get it, at a cost. You have to pay a percentage of your total for early withdrawal. If you try to cash out of your pet share early, the results could be grave. Let’s crunch the numbers. You stash $5,000 a year into your IRA for 5 years and then decide to tap into the cash because you are having a child and need the money. $5,000 times the five years is $25,000 minus the 10% early withdrawal fee in addition to paying taxes now on any earnings leaves you lets say around $20,000 with a end result of about a 5k loss.
Now, instead of stashing your cash in your IRA you purchased your puppy share with that money. Same situation occurs, five years pass and your first born is on the way. Time restraints, tighter wallet, less room in the house, you need to lighten your portfolio. How liquid is your pet stock? Let’s realize the actual damage of your investment. First, you are out the pocket cash and time investments for 5 years that have added up to $145,580, but more importantly are the fees tied to this early withdrawal. Of the roughly 4 million dogs brought to shelters every year, 2 million are euthanized. The fee for this early withdrawal is now living the rest of your life knowing that because of your poor investing abilities a puppy had to be put down.
To reiterate, if you asked yourself this question in the first place, find something else to spend your money on.
What are the specific risks associated with this investment?
Risks really depend on the investor and the specific investment. Have nice hardwood furniture? New carpets? Allergies? Don’t have a fenced in yard? There are many factors that will determine your risk level. You really need to learn more about the type of pet stock you are interested in and talk to people who already have some. Find out their risks first hand from other investors before adding it to your portfolio.
Knowing the costs and risks tied to an investment is only half of the decision making process. An expensive price tag can be a good investment if the returns outweigh the expense. Let’s look at what kind of returns you can expect in your investment:
Pet owners are also more likely to survive a heart attack than those who don't have pets.
People who own pets are less likely to be depressed, are better able to tolerate social isolation and are more active than those who do not own pets. Activity levels increased regardless of the kind of pet the individuals owned.
Pet owners living alone say they are less lonely and report fewer minor health problems.
Pets help relieve stress and anxiety by encouraging playfulness and promoting laughter.
Nurturing an animal may expand a person's ability to generate social ties.
Basically, a pet investment will provide you a healthier, happier and most importantly a potentially longer life. As I said earlier, time is our more important asset, and if by owning a pet we could expand our lives by a few years, then its return on investment would greatly outweigh the costs and risks.
Treat the pet share like you would any other investment. Research, educate yourself, ask people you know about their opinions, but most importantly, be honest with yourself. Is your lifestyle a good match for the cost and risks tied to the investment? If not, make the right choice and don’t get one. In the long run, everyone loses. If it is a good fit, congrats in putting your money into the one investment that will pay you daily dividends in companionship and unquestionable love.