The world of investment may seem like the exclusive reserve of wealthy, middle aged men. But the longer one spends in the investor community, the more one realizes that this stereotype holds little water in reality. The truth is that many people from all walks of life choose to invest. And because the world of investment can be whatever you want it to be, many different people use it to achieve a broad range of goals. Some people invest cautiously in Bitcoin to insulate themselves against the uncertainties of the global economy. Others invest in real estate because they’re looking for something relatively safe and reliable to supplement their retirement savings. Others choose investments that can also enrich their lives like classic cars, art or fine wines.
For every lifestyle and financial goal, there’s a commodity in which to invest, a platform to facilitate investment, and a supportive community to provide help, advice and clarity. From young collegiates to elderly retirees, investment is for everyone.
Nonetheless, finding success as an investor takes a particular set of skills and aptitudes. Patience, the ability to play the long game, an insatiable thirst for knowledge and understanding, clear goals and ambition… all of these traits can be hallmarks of a successful investor. And if you have the characteristics of a successful investor, you may be able to leverage the same traits in the world of business. The economic and commercial landscape are changing at an exponential rate, especially since the advent of COVID-19. Going into business for yourself might just be the most logical way to take control of your circumstances, your finances and your livelihood. Here are some reasons why investors have the potential to excel in entrepreneurship…
They understand risk without fearing it
Whenever you go into business for yourself, you invite an element of risk. Most entrepreneurs are conditioned to be as risk averse as possible. And in the age of Big Data, technology gives them the means by which they can “read the tealeaves” to get a better understanding of their market and operational performance. They invest in state of the art Business Intelligence software. They collect terabytes of data and try to mine it for actionable insights. They try to present that data in ways that are clear and purposeful for everyone in their organization, and try to prevent different departments from becoming data silos.
However, they can find that they have so much data that they have analysis paralysis. A condition that’s only exacerbated by a heightened risk aversion. One of the reasons why investors can potentially make great entrepreneurs is that they also embrace data, and use it to influence their strategic decisions. The difference is that they are not paralyzed by the fear of risk. Instead they embrace it. They acknowledge that there’s always a chance that the most bullish hunch might not pay off, just as they know that even the most bearish investor must assume some degree of risk.
They understand that sometimes going with your gut leads to the most profitable outcomes.
They understand how businesses operate
Investing in the stock markets affords investors a unique perspective into how businesses operate and interact. On the other hand, entrepreneurs often have their hands so full with managing the operational realities of their business that they may not be able to see the woods for the trees.
Seasoned investors survive or thrive based on how well they’ve don either homework. How much they’ve found out about a company before investing in a single share. They take the time to get to know a company’s annual turnover, any changes in leadership, its long and short term goals, and any other factors that could affect a stock’s long or short term profitability.
They understand that there’s no such thing as luck… just unknown variables
In a lot of ways, investment is much like sports betting. Sure, there’s always an element of chance. Of course there’s always the propensity for the unknown. But just because you don’t know if a match you’re betting on will enter The 3 Highest Scoring National Collegiate Tournament Matches, that doesn’t mean that the outcome is entirely determined by the whims of fate. A good sports better, like a good investor, understands that there’s no such thing as luck. There are only unknown variables. And the better understanding and control we have of those variables, the better equipped we are to establish an infrastructure for success. Because investors make understanding unknown variables their priority, they have a mindset that is conducive to success, tempering their gut instincts with understanding and insight.
They play the long game and the short game
A good investor understands the importance of goals. And like any entrepreneur worth their salt, they will have a broad range of long and short term goals designed to help them establish a path to sustained profitability. They keep their portfolio diversified without spreading themselves too thin. They understand which stocks can be liquidated quickly and easily to insulate them from risk when unforeseen circumstances arise. Likewise, they also understand which stocks are unlikely to yield ripe fruit in the short term, but should be watched and nurtured with the belief that they’ll hatch profitably in the future. In short, they have their eyes on the present and the future in ways that bode well for entrepreneurship. After all, the exact same mentality can be applied to product lines for retailers. Business owners need to understand which products will be profitable in the immediate future, while also identifying products that are evergreen and products that may not be popular at the moment but will prove profitable in the future as seasonal demand increases.
They understand that price and value are rarely the same thing
Investors rarely succeed when they know the price of everything but the value of nothing. They understand that value is a fluid concept and one that cannot always be measured in ways that look satisfying on a spreadsheet. The cost of any given investment may or may not reflect its overall value. What’s more, the relationship between cost and value may change over time. Investors may want to jettison certain stocks because they’re no profitable in the short term. However, the canny investor who’s willing to pay the long term may reap substantial returns on that modest investment a few years down the line.
It’s easy to see why this might translate well into entrepreneurship.
But why do entrepreneurs typically make for terrible investors?
As we can see, entrepreneurs and investors typically have a shared set of skills. But, historically, entrepreneurs actually tend to make pretty lousy investors. It’s a phenomenon that could dissuade seasoned investors from trying their hands at entrepreneurship. But this would be a shame and a waste of potential. Take a moment to understand the reasons why entrepreneurs tend to fail as investors and you have a potential roadmap for success including clear indicators of which fiscal land mines to avoid.
- Entrepreneurs (though smart and capable autodidacts) can find themselves intimidated by the jargon-heavy world of investing.
- Because they have become accustomed to delegating they listen to the financial press and external advisors rather than their gut instincts.
- Their risk averse natures make them panic-sell stocks that could be profitable in the long term.
- Because running their business takes up so much of their time they’re unable to watch their investments as diligently as they should.
As you can see, these needn’t necessarily preclude you from success should you choose to start your own business!