Probably the most important aspects I touch on in that chapter is how to look outside your normal field of knowledge, outside of your usual areas of influence and away from the geographical areas you know.
Whether you like it or not you are probably very similar to most of the people around you, you are probably not as unique as you think and basic economics dictates that if everyone is putting their money into similar things it will push up the price you pay for it and devalue those investments when you want to cash it in along with everyone else. To make the most of a cheap investment you need to find something different.
The unknown is often where people perceive risk because it is outside of their comfort zone but risk should never be calculated on whether you are comfortable with something it should be evaluated on price, potential return on investment (ROI), risk of total loss and potential to at least break even and get your money back.
Having lots of in depth knowledge in advance is not usually necessary as long as you can learn and pick up what you need to know during the life of the investment.
Let me give you some real life examples: Let’s say you have just $500 to invest and you decide to put it into a high yield savings account, a pension fund or other investment platform offered to the masses by a bank or financial institution. Let’s say you were really lucky and they offered you 7% on you $500, after one year your return on investment would be just $35.
Now let’s say you kept your ears open and heard someone was selling an old car for $650, it’s not in the best shape but it’s a classic and it could be worth a lot more with some work. The guy selling it is desperate so he will accept $500 for it if you wave the cash under his nose. But you don’t know anything about cars and it could take months to clean and fix it up?
If you take that $500 and buy that car would it take a year to clean and fix up (the amount of time it would take to earn $35 from the bank)? probably not. If you change your mind and sell the car later on as it is, could you hold out for an extra $35 so you would get back $535 quicker than you would from the “safe” investment? Probably. What’s the risk of losing all your money by investing in the old car? Pretty low risk as long as it’s not a total wreck and even if it is you could sell it for parts and possibly make even more back.
The best part: What’s the potential for doubling your money in less than a year or at least making 50% more? A very decent chance. What if you did this every 3 months? In one year you would have a return on investment of well over $1000 and potentially much more. Sounds better than 35 bucks doesn’t it?
You could start out on this without knowing anything about cars but you have time to find out or find someone who can help and even possibly afford to pay them if your profit margin is good enough.
Cars was just the first thing that came to my mind but you can transfer these theories to so many things. Antique furniture, paintings and other artwork, antique silver, land and property are all things I have seen inexperienced people invest in and make good returns.
I often get told by people that I was lucky to get involved in certain property investments while they were cheap but now they are too expensive. When it comes to property I have always looked outside of the areas that are popular now or “obvious”.
I look at places where nobody else is looking, it can be tedious and daunting sometimes wading through mountains of property details from far flung places but eventually you will find the right investment because they are still out there. Recently I spotted an old farmhouse with quite a bit of land for sale in Italy for about €20,000 ($25,000 or £16,000). If I didn’t have all my energies tied up in other projects I would have flown over to at least look at it. For that money, with a bit of work and some good marketing when it’s fixed up that could return a massive profit.
I have only been to Italy a few times in my life, I can count the Italian words I can speak on one hand and I have no clue about Italian property law but none of that would bother me. It’s Italy, not Libya but many people would still be scared and see it as a risk because it is out of their comfort zone.
Another point I want to make is that any investment that requires management by a third party e.g. a financial institution, investment fund or savings account is really only making a decent profit for the people managing the investment. At the very least it’s substantially eating into your ROI. In contrast any investment that you manage will have all the profit coming to you so it can be really worth putting in the leg work yourself.
Some of the investments I have suggested might not seem as glamorous as the brochures offering savings accounts and investment funds but what is more important ROI and hard cash back in your pocket or glamorous brochures?
One last thing to consider is long term or short term investment? Always consider how long you can afford to have your money tied up and/or how quickly you want to see a profit.
Please note I am not a financial adviser and if you need specific professional advice that considers your exact circumstances then you should get some but don’t be afraid to consider all your options as I have outlined here.
If you’d like more info on cheap investments my book and entrepreneurship course have a lot more tips, information and suggestions. Whatever you invest your time, energy and money in; I wish you all the best.
If you would like some help with marketing your business or just to share your experiences I would really like to hear from you. Get in touch via the form below and I will email you back.