By Darren Stewart, 80-20 Connect CEO
One of 80-20 Connect’s favorite catchphrases is “Ride The Bull” and even though this phrase can mean different things to different people, we have chosen this metaphor to describe the investing process.
For the more seasoned investor, making an investment is not nearly as terrifying as someone who is just getting started. Just like I would never attempt to jump on the back of a bull and give it a ride, but I am sure if I had done it 100 times, and survived ride 101 would not be nearly as terrifying.
Scoring and Investing
Bull riding is scored 50% on the rider and 50% on the bull. As an investor you need to take the same responsibility for your investments. Investing is 50% you and 50% the investment.
Above are just a few of the questions you should ask yourself before making any investment decisions. If you have a good advisor and a strong investment network you can ask them to help you create and answer all the necessary questions. When you can answer all the questions, you can then “score” or make a more informed decision about the investment opportunity.
80-20 Connect is designed to provide you access and the opportunity to learn about investments, become informed, ask questions and allow you to better connect with your investment network.
Emotional Roller Coaster
I can only imagine the emotional roller coaster a bull rider must go through when he straps his hand to a 1500 lbs piece of muscle and fury. If they let their emotions get the best of them they would never be able to do what they do and it would put their lives at great risk. These cowboys check their emotions at the gate, focus on the task at hand, stick to their game plan and count to 8!
Investing can be a very emotional activity. You may not be putting your life at risk like a bull rider, but you are putting your financial wellbeing at risk. Investing generates emotions of fear, greed and sometimes outright depression. When these emotions get the better of your investment decisions you will lose more than you win.
As an investor, you need to stay focused on why you invested in the first place, stick to your investment strategy and be conscious of your timeline for the investment. That being said, companies and markets do change and you may have to rethink the investment strategy. Again, a good advisor and investment network will help you make a more informed decision.
80-20 Connect is bringing a disruptive change to the investment industry by giving the average investor more access to their investments. Investors need to be more engaged with their investments and become better investors for the investment. This in turn will benefit the investment as they will have a better and stronger investor base. This is no different than companies who focus on building good customers and purging the bad customers. It’s just smart business.
Risk and Reward
Not all bulls are created equal, and not all investments are either. The bigger, the badder, the uglier, the bull, the better chance the cowboy has of getting a championship score. The also have a much higher chance of being thrown off, stepped on, gored or tossed around like a rag doll. Investments are essentially the same. The higher the risk the greater the reward, but the probability of loss is also greater.
The benefit of investing versus riding a bull, other than the obvious, is you have time. Most high risk equity investments are early stage or smaller to medium sized corporations. These corporations will need time to development their customer’s base, refine their product offering and increase their market share.
Many unsophisticated investors invest in these young companies thinking they will get a large return on their capital in a relatively short time period time. These types of investment windfalls do happen in the right market and with the right opportunity, but in most cases you are in the investment for the long haul.
As an investor, if you want to make these high risk, high reward investments you better find companies you really like and believe in. If possible, you should look for ways to support the underlying business of your investments and, in a perfect world, you as an active investor could receive additional value from your investment over and above an increased value or income distribution. Although this would seem like common sense to an average person, we are not seeing enough of a merger between the investor and customer. The relationship between the investment and the investor is not close enough in our opinion.
80-20 is set to change the way we think about investing. 80-20 will create a strong sense of ownership between the investor and the investment, and we will rely on our personal networks to drive investment knowledge and opportunity. If we all supported our investments as they are growing, our investments will have a better chance of supporting us when they mature. With today’s technologies we have the opportunity to better support our investments and it’s more than just being able to buy and sell the investments online.
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