The Best three questions
In my decades of investing, these are the best three questions to ask yourself and others before making an investment.
These are the best three questions that I ask myself and even more importantly, I ask my close circle of investment-minded friends. These questions have saved me from making really stupid mistakes…hope they might be helpful for you as well.
1. Where am I wrong? When I was about to invest in a “novel” food company, I bounced the idea off a friend of mine in the food manufacturing industry. He quickly pointed out certain things that I had misunderstood not only about the company, but also about the challenges of the food manufacturing industry as a whole. Needless to say, I avoided making the investment…and sure enough, that company is struggling to this day.
2. What am I missing? Sometimes you can be very smart about an investment, but perhaps you don’t have all the information or critical pieces of information that might change your investment thesis. So asking close friends who are more knowledgeable is a very sound idea. They can point out new or undiscovered information that might change or confirm your investment thesis.
3. Am I being stupid? Yes, you read that correctly. At the end of the day you have to ask yourself this question. And you should ask your close associates this question as well. When you can’t sleep at night because the thought of a certain investment going to zero is keeping you awake – perhaps you oversized that investment for the amount of risk you would normally feel comfortable with. Did you ask yourself right before you made the investment, “am I being stupid?” Probably not. This question has saved me countless times – from avoiding stupid investments to correctly sizing investments to exiting other investments.
Asking yourself and your close group of investment-minded friends these three important questions, might just lead to better investment outcomes and save you hundreds of thousands of dollars or more.
Enjoy and be safe.
If you like this post, please share it.