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dbelov275

Secret to Be a Successful Investor

By dbelov275, in Trading

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dbelov275    11

dbelov275
Posted

Investing is a calculated risk.

 

Throwing money into a venture without understanding the downsides, upsides, and being unable to control the moving parts is a gamble, no different than going to a casino without understanding the game of odds.

 

When I am investing in real estate, I am taking a calculated risk with every purchase. My business model is centered around buying property 70-80% of fair market value. Meaning, if i know the house is worth $1,000,000, I refuse to buy it unless I can get it for $7-$800,000.

 

This is me covering my downside, in case the market tanks, in case the house sits on the market for too long, in case there's a huge defect with the property, I've bought conservatively enough that in the worst case, I'm going to break even.

 

Speculation is if I buy the property at 950,000 with the hope that the market will continue to climb and so I can sell the home for 1,100,000.

 

Investors do not bank on speculation. Investors understand and evaluate all the factors in their industry and either hedge for the downside, or can control the moving components to reduce the risk.

 

When VC's are evaluating their next venture, they spent time evaluating the management team because a business is only as good as team directing it. That is a part of how they evaluate how risky the venture is.

 

Risk can be the unpredictability of a market or it can be the lack of education that you have concerning the industry.

 

An old investing adage goes like this:

"Cover your downside and the upside will worry about itself"

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