How to Be a Successful Investor, Regardless of What You Invest In

Summary

Successful investing requires a well-researched plan, patience to wait for the right opportunities, and maintaining liquidity to take advantage of unforeseen chances.

Abstract

To excel in investing, one must develop and adhere to a strategic plan, avoiding the temptation to impulsively follow trends or succumb to fear of missing out (FOMO). With over 15 years of experience, the author emphasizes the importance of not overextending on investments, even when they seem favorable, as the market consistently offers opportunities. It's crucial to have a clear understanding of what constitutes a good investment and to act when one's criteria are met. Keeping some cash reserves, or "dry powder," is also advised to seize unexpected investment opportunities that may arise, such as additional real estate purchases or buying stocks at a discount. A well-researched investment plan is invaluable, as it validates the investor's rationale and often leads to successful outcomes.

Opinions

Investing success is not about chasing after every good deal, but about making calculated entries based on predetermined criteria.
It's important to maintain some uninvested cash, referred to as "dry powder," to capitalize on unexpected investment opportunities.
A thorough investment plan, backed by solid research, is more valuable than rushing into investments without proper diligence.
The market will always present opportunities; patience is key in waiting for the right one.
Investors should not be swayed by market fluctuations or the performance of others, but should focus on their own investment strategy and goals.
Renovating properties can lead to additional investment opportunities within the same neighborhood, as it instills confidence in potential sellers.
Even the most promising stocks will experience downturns, and these can be advantageous buying moments if one has the capital reserves.

Regardless of What You Invest In

To get good at investing you have to make a plan for it, take action on it and keep doing it to maintain the skill. I’ve been investing for over 15 years. Sometimes I was purposeful in my actions, other times I let FOMO get the best of me. I’ve learned a lot after investing in stocks, mutual funds, biotech penny stocks, real estate and business private offerings.

Remember there is no shortage of good deals

Old time investors often say remark that you can go broke buying good deals. It’s true. It doesn’t matter the asset class, if you chase the bottom (or top!) you will run out of money very soon. The market will always give opportunity. You have to know what you’re looking for beforehand, make a calculated entry and ignore the rest. In the stock market there will be down days, even if you set a limit order. In real estate you will get a unit that’s slow to rent even though the phone rang off the hook for your test ad.

It happens. No one can predict the future but you can show predetermine a good investment range and execute the transaction when your criteria are met.

Always keep some “dry powder” on the side

Dry powder is cash that is not invested. You never want to have all your money invested because then you don’t have any left to capitalize on serendipitous opportunities.

Let’s say you purchased a rental property that needs renovation. When a property that was once an eyesore gets a new life, the neighbors often want to meet and engage the owner. We’ve been approached to buy another house on the same street or in the next block of an existing project more times than I can count. Seeing someone care about the neighborhood and property gives sellers confidence that you would honor their property as well.

The same is true in the stock market. If you take long positions you believe in the upward potential of the stock. Even the hottest stocks need to cool off some time. When a darling security has a down day that presents a buying opportunity.

If you’ve already invested all your money you won’t be able to buy the “dip” when a similar investment sells at a discount.

A well researched investment plan is the most valuable asset

Investing is simply testing out a hypothesis. When an investment pays off in your favor, it proves the initial rationale was solid. The best investors tend to be thorough researchers as well. I’ve always been surprised at how people put together elaborate business plans to open a local business like a restaurant but do not put a fraction of the diligence into a real estate or stock investment.