Hi there friends on Ecency and all other Frontends on Hive, it's TheRingMaster here, and I'm about to change your paradigm when it comes to what a real investment is and exactly how investors make their money.
There's this deception to think that the way to be an investor and a successful one at that is by buying good assets. Let's be honest we've heard a lot about that in seminars on investments and books about how to become rich.
- But here's the real way investors are actually making money guys; by buying things for less than they're worth, period. Don't worry, I'll explain it very well in this brief blog.
As an investor, making money is not merely acquiring nice things such as houses or shares. It is about buying things that are worth more than the price paid for them. This attitude of mine to investment success is why I believe what I am saying.
However, some people believe that one can only make profits by investing in the best assets; the most outstanding buildings, highly rated stocks or trendy commodities. But this is not necessarily true. The point here is not what you are purchasing rather how much you paid for it.
Let me try my very best to give you a simpler explanation on this matter.
You may want to purchase a toy. There are two options: one of them is a new-fangled toy that every person would wish to own but it’s very expensive and then we have another kind of toy which isn’t so fancy but still fun though quite cheaper? Which one will you go for?
Cheaper one for most persons, wouldn’t you agree? This is because the second toy may not be as flashy as the first but it’s a good deal as you are paying less for it. That’s how investments work actually.
You can buy an ultra modern building or a trendy stock but if you pay too much, then in the long run, you could lose. Contrarily, it is possible to purchase a nondescript building or a low – end security; however, if it is bought at relatively low price, profits are likely to be realized in that decision you made.
Now this brings me to my next point. For instance, just imagine that there is this firm which everybody seems to be talking about. They simply can’t keep their products on shelves and everyone wants to invest in them. Consequently, I will need some shares from their stocks because I'm an investor and I actually think that's a good investment. That's what you might think is right but not quite.
The reality of that situation is that the stock has become expensive due to company’s popularity.
Now suppose there is another company which is less known. The firm has excellent products but they haven’t yet become a hot topic to be talked about. Thus, the number of people buying their shares is low leading to lower stock prices.
If you had to make a choice between these two stocks, which one would it be?
Well if you were an astute investor, you would plump for the latter. Why? Because even if the first organization is well-liked; you would have to dig deeper into your pockets in order for you to acquire its shares. Nevertheless; with the second entity, one could buy its stocks at a fraction of the price and probably, multiply the amount ten times if it performs well in future.
That is the secret to excelling in investment, just buy below their worth. It is not about buying the most expensive ones or the ones which are liked by many, rather it’s about finding things at a good price so that you can get as much value for your dollar as possible.
So keep this simple secret in mind whenever you want to put your money into something.
The whole point I'm trying to make is that; the real secret to how investors is not in what asset they buy but what you're paying for. If an investor basically overpays for an asset which looks like it's high quality but because they paid too high for it, the chances of making money from is less than paying for a low quality asset that would not require you to dig too deep into your pocket.
So I guess what I'm trying to say is that if you want to be an investor, pay attention to how much you're paying for an asset and not just the quality of it and what people are saying about it or even how well it's performing at the moment in the stock market.
Thanks for taking the time to read guys, I hope this enlightened everyone that read. Keep making the right investments guys and see you next time.
Here's a good video with other very interesting and good tips on the right ways to investor - I hope this helps guys
Credit of image below goes to @brittandjosie
