Last Updated on February 13, 2021 by Filip Poutintsev
Investing is a profession of its own. It takes years of practice to become a successful investor and learn how to spot profitable investment targets. Below is a short guide of important aspects of investing, which many people don’t take into account.
Don’t lose all your money
The biggest risk in investing is not making too little profit, but losing everything that you invested. Don’t go after risky investments that may bring you a huge profit, but may also result in loss of all your funds. Remember that if after some time you can get back the money you originally invested without any profit, it wasn’t such a bad deal. You didn’t make any money, but at least learned some valuable lessons without losing any.
Invest only in something you know well
The easiest way to lose money is to start investing in something you don’t know. After making a huge profit, many successful investors feel that they are now experts in everything and start investing in industries they don’t know well and have never invested before. This usually does not turn out well. Stick with what you know.
For example, if you have invested your whole life in real estate, don’t dare start investing in tech companies, as you probably know nothing about it, and people who are asking for your money will fool you.
There are no unique ideas. If someone thinks they have something unique, they are overvaluing themselves. People who ask you to sign an NDA (non-disclosure agreement), just for telling their business plan are either fools or paranoid, and you should not work with either of them.
Invest in people not ideas
When investing, make sure that the people behind the company are truly the ones who can execute the plan in the best possible way. Interview them, like you would interview a person you are about to hire to work for you. Most businesses fail not because of the bad plan, but because of bad execution.
Don’t invest in overpriced projects
There are too many start-ups with no product, no clients and on money but are already asking for a million-dollar evaluation. People like that will most likely never make you profit; their whole business idea is to make a living by milking investors.
Don’t invest outside of your comfort zone
This can mean many things, depending on your comfort zone, but for example, it can mean not to invest in businesses that are established in countries you don’t know well nor trust.
Put ethics aside
You are here to make money. If you want to invest in a company because it’s ethical and not because it’s profitable, than that’s not business. That’s charity. There’s nothing wrong in charity, just don’t expect it to make money out of it
It’s much wiser to invest in the non-ethical business, make a lot of money, and then use that money to do good rather than invest into a poor, but an ethical company, that will make no impact on the world, and will also burn your investment.
Don’t allow politics dictate where to invest
In recent years with the rise of reverse racism, such form of discrimination has also arrived in the business world and the investing industry. Investors that follow this ideology avoid investing in companies that are run by white men. Such practise is stupid, wrong and financially destructive. Of course, one may have preferences in people, but making financial decisions solely based on sex or race of the entrepreneur is not wise.