When you are starting out as a beginner investor, you need to take care
not to become overwhelmed with information on strategies techniques, on how to invest.
You should aim towards investing in a vehicle…you know well, you have an entry and exit strategy
and you can cut the risk of losing your capital.
I know this because I faced this challenge over 15 years ago, when I started as
a beginner investor.
My story
Let me tell you a true story about myself so you can understand why I urge caution…
My first foray into investing was in my first year of leaving medical school.
I had studied the economic situation in my country…
We were officially in recession and my country was under United Nations sanctions.
The local currency experienced a sharp devaluation on the dollars,
1 US dollars being equal to 100 units of local currency.
Despite the economic depression, I maintained an open mind to opportunities that may present itself.
This brings me to a very important quality of the investing mindset…
The rich mindset understands this…. Every adversity brings with it a seed of equal prosperity
A flash of inspiration came into my mind…. while pondering over the economic situation one morning in my dingy studio flat…
My flash of inspiration came in form of two questions.
The first question was… How much do I need to live a luxurious life?
And what is the fastest way to start enjoying my dream life?
As a result, I brainstormed on various income possibilities…
The options that I narrowed down on were….
Overtime work as an intern. This option did not appeal to me because
I was fresh out of medical school and I was too frightened to work without supervision.
The second option was to start a part-time business on campus…I lived and worked in a teaching hospital at the time. I chose the latter option creating my first business venture- a secretarial service business.
The business failed within 6 months… but I walked away with a rich experience on how to invest and not to invest.
Now this brings me my advice to give you if you are a beginner investor…
I read about this in a book called multiple streams of income by Robert Allen….
I wish I had read this book 10 years earlier …because I would not have lost my entire 3 months’ salary as an internist on my first venture.
Robert Allen calls this “The Money Tree formula”
Money tree
The basic concept of the money tree formula is to generate streams of cash flow that requires little or none of your presence.
The money tree formula also allows you to diversify your portfolio, reducing your risk
However, before you can create “money tree” business-you need to have capacity to create control and own the income stream.
In other words, you need to have the mindset of an entrepreneur.
Types of Entrepreneurs
There are four types of entrepreneurs
• Intrapreneurs- generally remain employees within their companies.
They are skilled in knowing how to influence, persuade, and lead.
CEOs of fortune 500 companies fall into this category,
The hefty pay and compensations they get is for three skills I have mentioned.
• Extrapreneurs– have the skills of being creative and entertaining.
Artists, actors, songwriters, producers fall into this category. Michael Jackson is still making money even in the grave!
• Infopreneurs– organize, simplify, and teach. They make money selling information products. Bill Zanker of learning annex comes to mind. Authors, game software creators also fall into the category
• Autopreneurs– can analyse, see hidden value, and invest.
Venture capitalist, investors in companies, hedge fund investors fall into this category.
The discussion about the entrepreneurial personality is a topic for future posts.
I have talked about being an entrepreneur because…. an entrepreneur’s mindset creates businesses that need little or none of your presence.
Here are the nine essential characteristics of an ideal income stream
Multiple streams of income– the business is an extra stream of income and can grow exponentially to create other streams of income
Outstanding-the business is unique and has a unique selling proposition that distinguishes from the competition
Nothing down-the business needs little to no capital to start. You can start the business on a shoestring.
Employee resistant-the business should need little or no employees at all; you can outsource the non-essential task cheaply.
Yield– the business have high margin, high profit built into the products you sell.
Trends and timing-the business is in the trend and timing for a boom in the market it serves
Residual income –the business generates residual income long after you stopped working
Essential to everybody everyday -the business is essential and used to a large segment of society. In addition, the product motivates your market to use the product.
Enthusiasm. This means you should love what you do. Gary Hulbert says to become rich you need to love what you sell.
Reading Robert Allen’s book revolutionized my thinking about investing in general.
I decided never to get involved in any sort of business that failed the money tree formula.
I found myself rejecting many business opportunities that pitched to me; I became hungry for knowledge and have attended business seminars to learn more.
I have enrolled and completed business mentorship and coaching programs. I have not yet achieved my goals but my batting averages have improved.
With the money tree formula, I have narrowed my interest and focus in investing to the three great money mountains… I shall talk about this in my next post
What about you? Are you looking at your investing with a filter? If you are not, the good news is you can start beginning today.
I will leave you these words of wisdom by Jim Rohn
You cannot change your destination overnight, but you can change your direction overnight.
Think rich and grow rich