Wanted to share a newsletter post we created for our investors group that meets monthly in the Nashville, TN Area. Just putting it out there to hopefully inspire discussion!
What do you all think your #1 tip would be for an investor to be successful?
Well here's our answer:
Hope your week was great and you had some big wins!
Today we wanted to bring you our first M&M Investment Tip.
We want you to find value in this group even if you aren’t able to attend,
and even if it’s just reading this newsletter.
Question: What do you think is the #1 facet of successful investing?
Answer: PERSONAL INVESTMENT PHILOSOPHY.So far in our group, we’ve talked a lot about investing in Real Estate. But know that
this is not the only way to invest passively and to reach your goals. It doesn’t matter what
asset class you are investing in (real estate, paper assets like stocks/bonds/mutual funds, businesses, etc…),
you must know your PERSONAL INVESTMENT PHILOSOPHY before you even start.
Gena Lofton, the guest of our last group meeting, brought us a great presentation
on her story, where she’s at today, and how she has had her big wins.
Interestingly enough, it all goes back to her PERSONAL INVESTMENT PHILOSOPHY.
It’s knowing your WHY before you even begin to invest. Why are you investing?
What is your desired result? What is the long term goal? What is the short term goal?
To borrow a page from Gena’s book, “Escape the Madness”, there are four fundamentals
in your philosophy:
- DETERMINE YOUR RISK TOLERANCE.
- BUILD ON WHAT YOU ALREADY KNOW.
- CLEARLY DEFINE YOUR EXPECTED RATE OF RETURN AND WHAT YOU ARE CURRENTLY RECEIVING ON YOUR INVESTMENTS.
- QUANTIFY YOUR REASONABLE DISCRETIONARY CAPITAL.
We’ve all heard this, and it’s generally true in investing: Higher risk, higher return. Lower risk, lower return. You’ve got
to know how much you can afford to lose if it were to lose all it’s value tomorrow, and not have it handicap you. Obviously the goal
that we try to support in this group is to Mitigate risk. This is accomplished through having a great team, and investing in strong markets
or asset classes. Like any part of our philosophy, it is continually changing and evolving throughout our lives. Me personally? I have a higher risk tolerance now than I did when I began my investing career.
To take a hint from Warren Buffett, who is perhaps the most successful investor in the world, we only invest in things that either make sense to us, or that make sense to our team. Building on what we already know is essential. I’m probably not going to go into investing in a restaurant franchise at this point in my life, simply because it’s not what I know, and I don’t have a team around me who is experienced in that world either. This is another risk mitigation tool.
Know your desired Rate of Return. This is a trick for helping you to quickly evaluate dozens or hundreds of deals without spending ages
doing so. If something falls under your desired rate of return, skip on to the next one. It’s also important to be always evaluating what you currently have in your portfolio and to be aware of the returns your investments are producing. It’s important to be re-allocating as needed. This is also always changing with time. I do this for the assets in my portfolio at least once every other month.
And lastly, simply know how much you have to invest now, and how much you’ll have in the future based off your income and your other investments. This will also help you eliminate opportunities that aren’t best for you rather quickly.
Ask the questions before-hand. Are you investing for Cashflow or Equity Gain and Appreciation? Do you invest in things that require your attention and time, or to be strictly passive? Are you investing in things that you want to be proud to own, or do you just want to own things that make you $ every month regardless of what they are? Are you in a tax situation where you need to invest in things that are beneficial to your taxes, or does this not concern you? All of these questions are very important.
Until next time, happy investing!
+Seth Mosley and Michael Gomez - Music & Money Investors Group
Actually, there are two of them:
Number 1 Rule:
"Never, under any circumstances, for any possible reason, ever....EVER....spend the principle"
You will want to re-use it an unlimited number of times, but NEVER SPEND IT.
good call joe!
First, spend some money on a good education, not guru junk, a real education in the basics of business, finance and law. Without it, you can't really determine the points made above correctly. :)
When you see the deal, jump on it. Take action while others sit back and do nothing. You cant win the game if you are on the sidelines
I belive it is the Billionaire Richard Branson that I am quoting "The difference between millionaires and billionairs is that billionaires make faster decisions"
To often I see wannabe investors get left in the dust while real investors take great deals from them by taking action.
Aye, now there's the rub. @Josh Caldwell is correct that you need to remain agile enough to move quickly, but you also need to exercise the patience not to expend your energy tilting at windmills. Additionally, as @Bill Gulley and @Joe Villeneuve have indicated, you need the education and knowledge to discern a deal from a dog or, better yet, make a deal out of a dog.
Learn to analyze the numbers...and not argue with them. The numbers are everything.
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