10 Rules of Investing For Entrepreneurs
As an entrepreneur, you took a challenging, new and sometimes lonely road to success. But if you managed to build a solid and steady company that is growing, you might want to start to consider investing. The world of investments is infinite: you might want to give Forex, commodities or stocks a chance. You might want to put your money into real estate, innovative start-ups or new technologies.
Spending money to make money is an old truth that all entrepreneurs need to hold on to, just like the less pleasant truth that there is no such thing as a risk-free investment. If you want to smartly put your company’s money into something valuable and make a profit while at it, you need to understand a few rules and follow some principles. Let’s see how you can profitably invest as an entrepreneur and what challenges you must deal with ahead.
1. Never Borrow Money for Investments
This is a common mistake many people make when they feel confident enough to start investing. Losing your own money on a poorly implemented investment strategy is hard enough as it is. But losing other people’s money, together with your reputation is ten times worse. Such a decision may throw you into a world of financial troubles, affecting you, your company, your stakeholders, and your clients as well. Think about investments like you think gambling: never bet your full available amount and never borrow from others.
2. Do Your Homework
A responsible entrepreneur will never wake up one day feeling like it’s a good day to start investing in stocks or trading commodities. Before anything else, do your homework well and thoroughly. This may sound like a no-brainer, but many entrepreneurs found themselves bankrupt before understanding what really happened. Learn about the secrets of binary trading, understand how the stock market works, and make sure the startup you want to take under your wing is solid, and so on.
3. Set Your Risk Tolerance Bar Straight
Investing always implies taking risks and dealing with them. While these risks are necessary, recommended and beneficial for all entrepreneurs, you need to set the bar of your own tolerance for loss. One of the biggest mistakes investors make is to let emotions get the worst out of them. According to scientific research or financial behavior, investors are three times more devastated by a loss than thrilled by a gain. A minimal loss is more painful than a minimal gain, so make sure you are not overwhelmed by the tricky landscape of investing and by some inherent failures.
4. Don’t Invest for the Quick Buck
While some investments tend to pay off faster than others, you should always invest for the long-term. Stocks, commodities, real-estate and start-ups have their ups and downs at all times. But if you are into this game, be in the game for financial freedom, for opportunities, for breakthrough discoveries, for long-term steady profit and not to make ends meet. If you invest your company’s money you have to be aware that you will fight two fronts: making the company grow and have your investments return a comfortable profit.
5. Calculate Everything
One mistake many new investors make is to skip mandatory calculations. Investing always means spending money on transactions, taxes, fees, income tax rates, and so on. At the end of the day, you may find out that a certain investment didn’t pay off as you expected, as the capital gain was suffocated by the money you spent on making the investment work in the first place. Tax planning should be your primary concern when you begin to make investments.
6. Invest in Other Entrepreneurs, not Businesses
If you want to become an angel investor and put your faith and money in a startup, you need to place that investment in the people running the startup, not their business. You may be seduced by a novel and visionary hi-tech startup wanting to change the world with a new gadget. But sometimes, as it has happened with larger companies, some brilliant tech ideas died before taking their first breath of air. What you need to invest in are visionary, hard-working, dedicated and passionate people just like yourself. An idea, a concept, a revolutionary product or a newly-invented service may come and go, but the people willing to shed their blood sweat and tears for that startup to work will be your best bet for years to come.
7. Delegate
You can’t be 100% in control of everything and as a seasoned entrepreneur you probably already learned this lesson. One of the main rules of entrepreneurial success is to delegate the right tasks to the right people. This is also available for your investments. Instead of getting glued to a screen watching the stock market fluctuations, have your broker manage that part of the process. The main idea here is to choose your partners wisely and make sure all your collaborators are top-quality professionals. It is not easy to trust other people with your money, but the clients contracting your company have the same issues. All in all, building a trusting and transparent network of professionals will make your investments safer.
8. Don’t Bet on the Loser Horse
If you are a beginner in the world of investments, keep your risks to a minimum. Some idea or stock market may sound very good on paper, but prove to be a failure in the end. One of the first things you need to do is to pick some businesses or areas that are not associated with the concept of “declining industries.” Good businesses and solid commodities tend to show positive financial trajectories, and you will always need to consult with a financial expert before you put your money on a dying sector. Of course, nothing should be taken for granted, as unexpected shifts can and do occur, but instead of hoping that a market won’t fully reach its demise, make safe bets at first.
9. Patience, Persistence, and Decisive Actions Are Mandatory
Never stop looking for opportunities once you made a few investments here and there. A good investor is always waiting for the right circumstances to appear or for a new market to take wings. Constant evaluation of opportunities, patience and persistence are the keys for solid lifetime investments. Once you made up your mind to seize a certain opportunity after careful deliberation, don’t hesitate. Making a strong commitment and showing determination can gain you a lot of money on the long term.
10. Learn to Love the Game
Some entrepreneurs put every cent they got into their company and are extremely reluctant to make investments and “gamble” with their hard-worked money. Others understand that in order for their investments to pay off, they need to live below their means, make sacrifices, work harder, trust other people, make quick decisions and run the roller-coaster of emotions. In order to deal with all that, you should really love the investment game, be passionate about research, opportunities evaluations and the entire drill of investing – otherwise, such venture may lead to burnout, disappointment, regret and heavy amounts of stress. Love the game or leave the game. Otherwise you risk your own health and company’s success.
There are plenty of other rules to follow if you are a visionary entrepreneur willing to invest. Do you have your own set of rules or are there others you play by?
