From bad investments to losing $739,135 in a short period. We explore the lessons we learned from our many mistakes and hopefully helped you avoid them. Have you ever read a TechCrunch article about an angel investor who gained a few million dollars by investing in a hot business like Dropbox or Airbnb? After reading all of these stories, what does it make you want to do? Isn’t it time to invest? Years ago, I invested because I thought it was hip, and everyone else was doing it. As a result, I lost a lot of money initially. However, I eventually found out how to generate money.
Few things to consider before you start investing:
1. Invest in something you’re already familiar with.
Warren Buffett follows a simple rule for investing: he only invests in things he understands. He won’t touch anything if he doesn’t comprehend it. When I initially began, I followed a very different path. I put my money into anything I believed was hot. Many of those attractive firms seemed to be nice, but they ended up costing me money. You should only invest in things that you are familiar with. It’s OK if you want to start investing outside your comfort zone as long as you’re ready to lose some money to get experience in a new field.
2. Don’t be too stingy with your money.
I used to be one of the most greedy persons on the planet regarding earning money. I’d always wanted to sell at the high, and I’d become frustrated if I didn’t pace things well. My greed caused me to lose money when I might have earned money on a few occasions. Money that is guaranteed is always preferable to money made in the future. It’s challenging to optimize your earnings potential. Take advantage of the chance to cash out on one of your assets and be satisfied with the return. Because you can’t anticipate the future, sell if the price is correct unless you have facts to support your decision.
3. Revenue is less significant than profit.
My worst financial blunder was investing only based on revenue growth. I’d send a check right away if the prospective investee showed strong development. This technique has one flaw: not all company models are booming. Even though a company is experiencing rapid growth, this does not guarantee that it will be profitable in the future. You must examine the company to ensure that its margins are enough and produce a profit in the future. There’s nothing wrong with investing in high-growth firms, but you must ensure that their business strategy can generate profits in the future.
4. There are a plethora of ideas available.
It doesn’t matter how excellent an idea is; if the team behind it is terrible, the company will fail. Do yourself a favor and invest in people rather than ideas. In an ideal situation, a company would be a terrific concept led by outstanding entrepreneurs with a staff that can execute quickly. If you can’t locate an investment that meets these requirements, you should rethink your decision. Companies often change course from their initial business concepts, which they believed would be successful. They’ll have to change their approach and come up with fresh ideas. You’ll lose money if the team isn’t excellent since they won’t be able to pivot.
5. You gain money when you purchase rather than when you sell.
It’s uncommon for someone to pay more for anything than its market value. As a result, you should aim to acquire the most excellent bargain available when making your first investment. Think again if you believe there are no exceptional offers. There are always fantastic discounts to be found; all you have to do is look for them. For example, I was able to get a penthouse apartment in Las Vegas for about $250 per square foot in the highest-rated building on the strip. All of the other comparables indicated that individuals were spending little more than $600 per square foot. I understand that the bargain seems to be too good to be true. Still, the developers needed to move inventory, so they sold all of the penthouses to a group that could afford them all because I knew one of the people I could get one of the properties. I now have the opportunity to sell the apartment for $350 per square foot, although it has only been 30 days since I purchased it. You will discover excellent offers if you look for them. However, as an investor, you must remember that you are only as good as your previous transaction. As a result, be cautious while selecting them.
6. Don’t overextend yourself.
You should avoid spreading yourself too thin, both financially and in terms of time. I presently have over 30 assets since I invested in a spray-and-pray manner. The issue is that investments aren’t as simple as you may believe. The more time you devote to each one, the more probable they will succeed. So, if you have 100 investments, you’re unlikely to have time to assist the majority of them. From a financial standpoint, many of your assets will demand additional funds in the future, even if it doesn’t seem to be the case right now. Therefore, you should permanently preserve a percentage of your cash in the bank if you need to increase your investing capital. Neil Schwartz, who owns hundreds of rental homes in California, is an excellent illustration of this. During the crisis, most real estate owners went into problems because renters couldn’t afford to pay their rents, and property prices plunged. Neil performed well during this period because he had enough cash on hand to keep paying the mortgages on his houses even while they were unoccupied.
7. You shouldn’t put all your eggs in one basket.
Put all of your money into one company if you’re starting and don’t have a lot of cash since it is what may assist you in becoming wealthy. However, diversify your assets if you currently have a sizable savings account. This way, if anything goes wrong, you won’t lose everything. However, you are well aware of this. When I said, “don’t put all your eggs in one basket,” I truly meant that you should diversify your risk profile. Don’t only put your money into risky or secure assets. Make sure your money is dispersed across a variety of risk profiles. I used to solely invest in innovative concepts with a high probability of success. On the other hand, those concepts are hazardous, and most of those investments will fail. It doesn’t mean you shouldn’t put money into enormous, risky ideas, but it does imply you should equally put money into safe bets. My money is currently invested in real estate, Internet firms, the stock market, and a few other areas.
Conclusion
I hope you don’t make the same errors I did since it cost me a lot of money. I ultimately figured out how to make better financial decisions, but I hope you won’t have to squander as much time and money as I did. Furthermore, if you want to enter into investing, make sure you only do so if you’re prepared to keep betting for the following five to 10 years. Investing isn’t a short-term game, and you can improve your chances of success over time.