Have I got your attention. The title is close – and I want to explain in some more detail exactly what I mean.
Whilst ‘knowing what you are doing’ may sound pretty obvious, have you ever invested (or made another non-finance based decision) where you didn’t fully understand what was happening?
I know I have.
I’m not saying you need to understand the intricate DETAILS of every decision you make. But you really should understand the following:
- What is the end-state or result I want to experience from this investment.
- What is the preferred scenario or outcome?
- What is the least preferred or worse case scenario? How can I mitigate this? Am I still OK with this.
- What other options are out there?
I don’t believe the saying of “If you doesn’t understand something, don’t invest in it.” But rather:
Because there are so many variables that can help you out. Some of my investments achieve great cashflow results. Sometimes up to nearly 20%pa. I used a variety of investment types to achieve that.
And I leverage from specialists in other fields. Now I don’t understand the DETAILS in how they assess and position certain deals. But I DO understand the process, the pros and cons.
I continually measure and track the results and therefore I get a better and better understanding.
If you wait to be an expert in everything before you acted (especially in the world of investing) then you may be waiting a very long time.
The BEST results I’ve achieved has been receiving guidance from people who knew more than me. People who had got ‘runs on the board’ and ‘walked their talk’. And sometimes I just needed a ‘sounding board’ of a Mentor to ensure I was still on track.