It is very easy to get caught up in the “buy-or-sell” mentality. That’s what got you into the game in the first place, right? Thinking of investing as a buy-and-sell venture has become all the rage on Wall Street and Main Street. You see it everywhere: posters, advertisements, television commercials. Everywhere you look, you can find people putting their money down on some new venture. So why do they do it?
There are many theories about why people go into venture investing. Some say it’s because of their desire to have a lot of money. Others say it’s because they are seeking out opportunities that will provide them with greater financial security in retirement. Still, others point to a need for self-discipline and wanting to make sure that their money stays in place.
Regardless of which school of thought you align yourself with, the fact remains that investors often become great investors by doing things a little differently than more conventional investors. So how do you get started down this new way of thinking about investing?
The first thing you’ll need to do is to determine your goals. How much are you willing to invest? What type of return are you hoping for? How often are you looking to diversify your portfolio? Once you have answers to these questions, then you’re ready to start thinking like an investor.
Most new investors start out investing by following the advice of more experienced investors. They listen to their advice and do their own research. After a time, when they’ve done enough studying and have enough investments under their belt, they go into the realm of venture investing.
Many investors who dive into venture investing do so because they feel that the field is too complicated and they need a simplified system to make investing easier.
While it’s true that there are more complex fields than simply real estate, businesses, and stocks, those complex fields can be made a lot simpler with a clear understanding of a single business model. A single business model is a method by which an entity conducts business.
There are many different models, but in general, the business model is how the entity makes money. It’s not necessarily the investment strategy or how the investment is done, but the model.
An important part of how to think like an investor is developing a business model for whatever it is you’re trying to purchase. When you look at the price of a particular piece of property, for example, you’ll want to have an idea of its profitability as well as the competition in the market.
If the price is too high, there’s little reason to expect profits, and if it’s too low, you could be gambling with your investment.
Your mindset needs to be clear as well. As you start to develop your thinking like an investor, you’ll also need to develop a realistic mindset. You don’t have to be a math whiz, but it helps to have some basic skills in that area. Some people believe that the only way to make smart investment decisions is to go it alone or hire an accountant to do all the math for them.
While it’s true that you should spend time researching every choice you have, don’t get so caught up in the process that you neglect to put yourself in the best light possible.
The third step to learning how to think like an investor is to take the time to understand how the various forms of reward affect your investments. Reward dynamics are as important to the overall result of any investment as are the factors that influence the price you pay for a specific business model.
For example, what is the demand for this business model in my area? What types of customers are likely to be interested in buying this type of property? These are all important questions that help you determine whether or not you should purchase the model and how you should structure your marketing to maximize return on investment.