Stick to what you know
Rather than investing in hot, high stakes industries you don’t know much about, invest in businesses that are in fields you are familiar with or that share a passion of yours. For example, you’ll never be able to predict the cycle of boom and bust that goes on in the real estate industry if you’ve never owned or sold property, but you may easily be able to tell what the future holds for a fitness tracker startup if you’re a big gadget enthusiast. Unlike forcing yourself to follow the herd just because Forbes tells you to, the easy route pays dividends—remember, there’s money to be made in everything.
Despite being on opposite ends of the tax bracket, journalists and investors share a key attribute: they read in every morning. That means picking up a newspaper, tablet or smartphone and absorbing everything that happens on a daily basis, which helps you understand more about the state of the world around you. You’ll begin to draw new connections between real world happenings and their financial implications, making your investments that much more informed. You’ll also understand the cycles certain industries experience. Think about it—in hindsight, buying into WhatsApp before Google snapped it up was an obvious move, but you’d never have known it if you hadn’t paid attention.
Make use of your connections
No, this doesn’t mean investing in your friend’s latest entrepreneurial venture. As a person capable of financially committing to investment, you’ll likely have met some movers and shakers along the way. Ask successful investors and business owners for advice on where you should set your sights next. Even better, if you have a particular mentor (a key resource both entrepreneurs and investors should always have), they can not only point the way, but tell you how to get their using their valuable experience.
We’re taught growing up that embracing change is the key to success (really, it’s adapting to change that’s important, but that’s another story). However, for the average Joe without too much money to throw around, industries that are stable represent preferable investments to stocks that suddenly spike and may drop just as quickly. Banks and consumer industries may be harder to buy into due to a relatively few and small drops in price, but they’ll always be on the up and up—they’re especially great for RRSPs.
Beware the false positives
In your research, you’re certain to come across several companies that are being touted as high performers, but being a front-runner is not enough to make them a good investment. It is possible for a company to be outperforming other organizations within the same faltering sector. Don’t let hype blind you to the realities of an industry that may be facing technological or economic challenges—one that will ultimately take a dive, taking this “great investment” along with it. Double-check your facts.