You must have heard of the 80/20 rule isn’t it? This rule was discovered by Vilfredo Pareto, an Italian Economist in 1897. He came up with this: 80% of our success comes from 20% of our efforts.
But when it came to money and investing, 10% of the people had 90% of the money and these 10% are not just filthy rich, they are seasoned investors.
Investing means different things to different people
Many people are not investors, they are speculators or gamblers. ‘Hope’ clouds their investing thinking and they live in fear. A true investor makes money regardless of the market going up or down.
You as a new entrant into the world of investing know little or nothing about investing and that’s why you might take the worst way, falling to the 90% that make 10% of the money.
Many people want to invest but they are struggling with questions like:
- Is investing not risky?
- I have certain amount to invest with, what should I invest in?
- How can I invest when I don’t have money? And many more.
This article points you in the right direction of what to do not to invest the worst way.
1Don’t Invest The Worst Way
You can’t just talk about investing without mentioning the word ‘business’ because what we invest in is a business. If you’ve been asking “what should you invest in?” take this to heart: You can invest in anything.
If you’re investing in stock, you’re investing in a business. If you buy a plot of land to build a house, that house is a business, and so is it for bonds and other securities.
The worst way to invest is to invest as an individual. This is so because as an average investor who knows little or nothing about investing, you wouldn’t see the route rich investors are taking. They make their businesses by their investment.
If you want to be a good investor, you first need to be good in business. Rich investors don’t buy investments, they create investments called businesses that millions of people wants to buy.
2Don’t Think Like an Average Investor
In most cases, it is not money that makes rich people rich investors, it is their thinking pattern. There’s a mental difference between an average investor and the rich investor. That difference is that the rich investors do the exact opposite of what everyone else is doing.
For example, most investor say: ‘don’t take risks’, but that’s exactly what the rich investors do. Most people say ‘diversify’. The rich focus.
This thinking pattern of the rich investors is the gap that must be filled by average investors to enable them become good at investing.
3Don’t become stuck in one way of thinking
You will become a poor investor if you become set in one way of thinking (i.e. if you think there’s only one way to think or do something.
Poor investors don’t take risks but rich investors take risks. Rich investors are more flexible in their thinking than an average investor.
For example, while an average investor thinks about cutting costs, debts and live on the fear of the market crashes, the rich investors also needs to think, but this time, on how to increase debt and looking forward to market crashes to exploit opportunities.
That example sounds like a contradiction right? Then you need to stop being stuck in one way of thinking. You’re seeing only one side of how to do things (how to invest) while the rich investors are aware of the two sides of investing.
It is the side you don’t see as an average investor that keeps you average and the rich investor rich. This is part one of the article, watch out for the 2nd part of it.
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