Invest To Make Money, Not To Get Rich

The technology boom of the '90s romanticized the "rags-to-riches" ideal that all of us dream about when investing. For those who invested $ 1,000 in Dell at $ 5 in 1990, held by the seven splits, then sold at $ 59 in March 2000, the dream was a reality. That investment would have returned an astounding $ 1,132,800! Picture of making more than $ 1 million for every thousand dollars invested. Beyond Dell, companies such as eBay, Amazon.com, and many others made their investors very wealthy.

Unfortunately, the 90s produced a different investment climate than we use. We experience the birth of a new technology and it requires new businesses, jobs and consumers to the needs of the industry to fill. Immediately, our economy had a new demand with limited supply. This led to the feeding frenzy stock purchase that we all witnessed.

Once settled in reality, too many companies were heavily leveraged, over-extended in equity, and / or have income to their business models do not support. The sudden collapse of the mega-companies like Webvan, the online grocer who wasted more than $ 750 million, was greatly responsible for the economic problems we face earlier this century.

Moral of this story: Invest to make money, not to get rich money.

A lessoned learned during the 90s was the importance of due diligence, researching business accounting, management philosophies, growth strategies, etc. This allows to detect investors strong investment opportunities and minimize the risk of buying a bankrupt company .

Invest to make money emphasizes the need to evaluate the financial goals and take action, do not jump to get there. The oil boom of the year led to a number of high-yield stocks, doubling or tripling in a matter of months. Using one of these files use is a big jump, but finding a 200% gain would require 7-8 25% losses. Eventually an investor would lose more than gained.

With proper research, finding companies who are able to return 10-20% growth per year has a high probability. Although not as romantic as a high return investment, five 20% profit is equal to the yield of a 100% profit. This is the meaning of steps. Arrange for solid returns and repeat the process as often as possible. While not every stock will produce 20%, strong companies will limit to select. Huge losses your risk

DPB Financial

Look for our next article, coming soon. A continuation of this topic, we will address the "how" of analyzing your financial needs, goals, and building and investment strategy to achieve these goals.

* The information in this article is for educational purposes only and is not provided as investment advice. DPB Financial advises investors do their own due diligence or seek the opinion of a professional investor. *