Safety in Familiar Asset Classes
As with all investing there is always a factor of risk, without it there would be no point of acquiring investment knowledge as one would just pick the highest return vehicle assuming risk was symmetrical across all ventures. Here are a few points to keep your focus when considering investing opportunities…
Realm of Competence
Understanding the investment vehicle you choose to put your hard earned capital is a critical factor when putting your dollars to work. I will take an example from my personal situation to illustrate. Since I work daily in the world of real estate and being in tune with the heartbeat of the market, there is a certain comfort when assessing investments that are synergistic with my area of expertise. When I assess mortgage investment opportunities that are secured by property, the ability to evaluate the value with my available resources is an enormous asset. Or perhaps an opportunity to buy a rental property in a specific area can be easily identified as a good/bad opportunity from my knowledge of the demographic tenants in that neighborhood. Just as Warren Buffet does, investing in ventures that are familiar to you will let you sleep better at night!
Ignore the Hype
Admittedly with all the recent cannabis stock craze I threw a couple of dollars to the wind. But after reflection I realized that this is not my area of competence and the time required to acquire the knowledge of stock investing is not a part time job. I have decided to spend the time instead to build my mortgage investment company as it is more in my comfort zone. The deciding factor was the apparent “ease” of making money in the current cannabis market and that everyone was pocketing “easy money”. Call me a skeptic but when I repeatedly come across conversations of instant fortunes from a click of a button I am not convinced it is sustainable model.
Repeat and Refine What Works
If you are fortunate enough to find an investment vehicle that works and is producing reasonable gains my advice is simple… Keep doing it! Sounds obvious but here is something that may not be, as the tenancy of human nature is to stay comfortable. Evolve the process and find better ways of doing the same thing to increase its efficiency. Small details over time that improve the system can produce exponential returns. A popular saying is “If its not broken, don’t fix it”, but I’d also add there is only upside in educating yourself to improve the process. The world is constantly changing and without improvement to your current portfolio you may be easily allured into taking on that “latest and greatest” investment that promises grandiosity but seldom delivers.