It has been said that to be a success with investing you have to think like an entrepreneur, and that makes a lot of sense. In fact, in the case of some investments, such as stocks, you are becoming a part owner of the company in which you buy shares. If you are running your own business and are thinking about becoming involved in any aspect of investing, here are some of the reasons why entrepreneurs can be great investors.
Decision making
When you’re dealing with investments, you are often faced with the need to make a decision on the basis of limited evidence in a short space of time. Perhaps the price of a stock you have invested in is falling, or there has been a dramatic piece of economic news that could shake up the market. Fortunately, entrepreneurs are used to this type of decision making. When you’re running a business, you have to make all kinds of decisions and stick to them. There are few indecisive entrepreneurs, which is why they are well-suited to investing.
Using your knowledge
Experience in running a business will put you in a strong position if you are investing in a related market or industry. Your day to day experience of dealing with issues such as cash flow, inventory turnover and other key business aspects will also give you an expert eye when it comes to assessing other companies for their investment potential. If you have an entrepreneurial mind that is focused on gaining new knowledge and learning new skills, this will give you an advantage above other investors and propel you towards a successful investment career. So whether you’regathering a list of trading CFD’s – hints and tips, analysis advice etc. – or researching property investments, the experience of running a business coupled with the attributes of a competent entrepreneur will put in you good stead when learning the ropes in the world of investment.
Risk understanding
Entrepreneurs also have an advantage when it comes to assessing risk. For an entrepreneur, risk is defined not just in terms of what they may lose if a venture goes wrong, but also by the potential rewards they will not benefit from if they don’t take the opportunity. That gives entrepreneurs a balanced view of the risk versus reward equation, enabling them to weigh up both sides more effectively than a regular risk-averse individual coming fresh to the investment world.
Long-term approach
Another important advantage enjoyed by entrepreneurs is that they are used to seeing the long-term view. Many investors struggle because they are carried away by short-term factors, either panicking if an investment heads in the wrong direction, or getting carried away with early successes. Anyone who has had to build a business and watch it grow slowly over time will appreciate what can be achieved with a long-term vision, rather than a ‘get-rich-quick’ mentality, and in this sense, entrepreneurs are ideally placed to make effective investments.
Conclusion
Investing, just like running a business, is hard work, and there are no guarantees of success. But many of the qualities that make a successful entrepreneur also underlie the careers of profitable investors, and the overlap between the two spheres of activity is no coincidence.
