What Should You Invest In?
People ask me all the time, “Alex, you invest, right? What should I invest in?”
Sometimes, I’ll get lazy, and simply say, “yeah, gold and silver.” I always regret saying this. Not because gold and silver are bad investments, they’re not; they’re fairly safe investments. But I’m being rather disingenuous in advising you this way. I’m failing to inform you of a very important lesson.
You should only ever invest in what you know.
Every industry is different. I would never invest in a tech company that is up to its eyeballs in debt. I would feel completely comfortable, however, investing in a zinc mining company that is up to its eyeballs in debt. Mining is a laborious industry that requires literal tons of equipment; companies can never buy this equipment outright, they have to take on debt. Tech companies on the other-hand, require little overhead and are fairly cheap to manage. The point is that every industry has its nuances, and you cannot know all of them. So even if gold and silver is a decent investment, most people don’t understand how mining companies operate, and I’m therefore providing you with a disservice.
So I really don’t know what you should invest in, because I don’t know what you know.
If you work closely in oil, it only makes sense that you should invest in oil. You know, for instance, when oil companies shut down for new seasonal blends. If you work closely to copper, by all means invest in copper, because you’ll be one of the first to know when copper shortages occur. If you have studied tech furiously, by all means, invest in tech; you know what products consumers are looking for. Money can be made anywhere on the market, and there’s more than one way to make money.
Become an expert at a few things
With investing, it’s better know a lot about one or a few things, rather than to know a little about a lot of things. If you know everything about one industry, you are prepared to invest strategically from then on out; you’re informed on how these specific companies react to changes in the market. You can predict the good times, and buy accordingly, and you can short sell in the bad times.
If you currently know nothing about the market, pick something you’re interested in, and learn as much as you can. I personally decided to learn about certain commodities, because usually, you only have to know two things when investing in commodities: is there too much of it, or too little of it. Commodities are tied to supply and demand; I need not worry about the many other variables considered in business investing, such as management, competitors, etc.
Don’t worry about what others occupy themselves with.
We should refrain from listening to “hot tips.” I personally lost the most when I was simply looking for the next trending company. Many of these hot tips may have been actually been correct predictions, but without any background information to these industries, the odds were not in my favor.
And because most people simply follow the money, the tips you receive will most likely be second-hand information. It’s much better to invest in what you’re most sure of. It’s much better to be the person who can create hot tips, rather than the person who is receiving them.
What I’m trying to say is this:
“The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.” -Ralph Waldo Emerson