Who dosen’t want to invest into NEW things?! That’s where the money is.. right?! Well.. it’s not always a good thing to invest into NEW things and I will tell you why!
At first.. let’s think about why we invest after all.. For me personally.. investing is about making money first. It’s not the only important factor, but it’s the most important in my opinion.
The one BIG problem with investing into NEW things is it’s VALUE. There’s usually very little of it. Let’s take new companies for example. When you invest into a company then you first should calculate it’s present value and.. second you should look what this company is doing in 2, 5 10 years plan. Is this company growing and getting more valuable.. or is this the expired niche this company is in.
Goal is to BUY yourself into the company when it’s cheap(price of the stock is cheap/1% of the company is cheap) and if the company is grown and become more valuable then your share is now worth more! It sounds really simple and not so hard to understand… BUT many people still make this mistake and on both sides as investors and as business owners.
MISTAKE that many people make!
The main mistake many business owners make is that they ask too much money for their business. We have seen it many times in Shark Tank. I do understand what the business owners mean.. they believe that their business will be THE NEXT BIG THING. BUT.. even if it will be the next big thing.. why would the investor pay you for your future price.. is it for that if your company becomes successful.. he will just get his money back?!!
I actually was inspired to write this post by the book called “The Intelligent Investor” to write this post. In that book Benjamin Graham said:”Obvious prospects for physical growth in a business do not translate into obvious profits for investors. While it seems easy to foresee which industry will grow the fastest, that foresight has no real value if most other investors are already expecting the same thing. By the time everyone decides that a given industry is “obviously” the best one to invest in, the price of its stocks have been bid up so high that its future returns have nowhere to go but down.”
In my experience this same situation is happening not only in stock market, but also in startups & cryptocurrency.
The positive side with companies is that you will actually get your share in that business and businesses produce income. So in long term there is still a chance for you to become profitable, even if you bought into the company with HIGHER PRICE it was valued at!
I know a lot of people who bought into BitCoin when it was TOO obvious (too many investors in) and now they have lost some of their money. Like with everything.. BitCoin also has it’s reasons why it came down and we are not going to discuss them in this post. But BitCoin coming down is the best thing ever happened to average investors! People started to trust cryptomarket too much! In the future the losses would have been much bigger.
I am not a professional investor or a licensed teacher in this investing world. I am just a guy who is always learning, making money with investing and has a common sense.
When you are looking at the new potential investment opportunity, then see if you can calculate it’s present price. If you can’t then you have to be more careful. If it’s just a startup with very little results.. you can always customize your agreement with extras. This is possible if you are investing into startups.
When it comes to crypto… in my opinion we haven’t seen anything yet. Bigger companies with HUGHE IT TEAMS are not in the game yet… and believe me… there is a reason for that. In my opinion when they do enter the market.. I would be very unhappy holding hundreds and thousands in todays cryptos. But let’s see… nobody knows what the future will bring.
I wish you the best investments for your money!
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