Almost all successful investors have a very strong analytical mind. One of the best ways to stimulate and direct your analytical mind is to ask the right questions. When you ask yourself the right questions, you can think optimally and make better decisions.
The same goes for making good investment decisions. Asking yourself the right questions can lead to better analysis, which in turn can lead to either smarter investment decisions or an improvement in your attitude toward investing in general.
To help you become a better investor, we have looked at what we believe are the six most important investment questions. At the end of the article, we have also included a list of 30 investment questions that you can use as a checklist before making any investment decision.
It has happened to each and every investor. A great opportunity that was completely missed. The most popular general example of the last decade might be Bitcoin, the Monster baverage or SPY during the initial COVID-19 panic, where there was a big drop and then a twofold increase.
We would all buy a few dozen Bitcoins or the Monster stocks if we could turn back time, but of course it’s easy to be a general after the battle.
However, instead of feeling sorry for yourself, there’s a much better way to think and learn from missed opportunities. Once such way is to ask yourself how differently you should have thought and acted at the time to avoid making an investment mistake.
Ask yourself sub-questions like:
Try to imagine as vividly as possible all that would have had to happen for you to take the opportunity.
Answering these questions should also provide you an answer to another key question: how can you change your attitude, environment, or circumstances to prevent the same mistake from happening to you again?
Perhaps you can establish a rule to invest at least one day in studying similar investments. Perhaps you could create a small fund that you can risk on similar investments; or maybe you could join a new community, change your decision-making process, or something similar.
Let us now move from missed opportunities to the proper attitude toward future opportunities. There are almost unlimited possibilities as to where you can invest your money.
The basic question that can help you narrow down the choices is: which risks are most likely to yield the greatest returns? When you decide to invest your money, you also take the risk of losing some of that money (in some cases, you may even lose all of it).
Different types of investments come with different risks.
The goal in investing is to find the investments that have as low risk as possible and a high potential for profit. The best investors seek investments with a high enough margin, so the risks are very small compared to the upside potential.
If you already take risks, you want to make sure those risks pay off, but it’s impossible to make only profitable investment decisions. Studies show that even the best investors in the world are wrong about half the time, but when they are right, they are exceptionally right.
The point is, if you want to answer the question of which risks are the most likely to produce the biggest returns as correctly as possible, you need to:
As an investor, you must be able to categorize and compare different investment opportunities. You must develop your mind to think in terms of risks, rewards and odds.
All this will also greatly help you to develop your analytical mind, become better in business, train your decisiveness, and, in the end, you will get an opportunity to choose a winner and outperform the market.
Keeping winning investments in mind leads us to the next question, and maybe the most important one when it comes to being a successful investor – what is your edge in this play?
If you don’t have a competitive advantage, don’t compete. Investing is not easy and it’s super competitive. That’s why you always need an edge. There are many different edges you can have in investing:
As you can see from the list above, most often you need to have some unique type of know-l-EDGE and insights. If you don’t know right away what your edge is, you probably don’t have one. But don’t let that stop you.
It’s never too late to start developing your investing edge, and Equito academy is here to help you.
One of the worst personal characteristics in investing is to be naïve. As the book The Psychology of Money explains, the worst money decisions are made based on excessive optimism and emotions like greed, insecurity, and fear. That’s why the author Morgan Housel recommends that you be a sensible optimist in life.
Sensible optimists don’t believe everything will always be great, because it won’t. They believe that the odds of good outcomes are in their favor over time, while being sure to have the financial margin and competencies to face the setbacks that occur along the way.
Being a sensible optimist also means you should be okay with a lot of things going wrong, because that’s the natural course of life.
That leads us to two important investment questions to ask yourself before making an investment decision:
And remember, as Carl Richard said, risk is what’s left when you think you’ve thought of everything. Ask yourself what would happen if your investment declined by 30 %, 50 %, 80 % or 100 %?
A very important part of successful investing is having outstanding risk management in place, making sure you don’t overstretch yourself on a single investment, and ensuring that you don’t get consumed by emotions such as greed or naïve optimism. There’s no point in investing if you can’t sleep at night.
You want to be a smart, sharp investor, but not pessimistic. You must never forget about the other part of the risk equation, and that’s what can go right – the upside potential.
At every moment there are numerous investments out there that are bringing great returns to investors. Just as things can go wrong, they can absolutely go right. Your job as an investor is to find a few investments that will go extremely right.
This section is especially useful for investors that are pessimistic by nature. If you are one of those, you should ask yourself several sub-questions in this regard, such as:
The final investment question on our list addresses self-awareness and introspection abilities when it comes to investing. A very important part of successful investing is being able to understand and manage your emotions.
As an investor, you must often act differently from what you are feeling. The best way to dealing with your emotions is to map them, in other words, write them down. The recommended way is to use a pen and paper (instead of a computer).
The main idea is to explore your emotions every time you are on the brink of making an investment decision. The following questions should help you explore your emotions:
If you sense that you’re making an emotional decision instead of a logical one, explore further. Try to find the root cause of the emotions that are trying to drive your investment decisions. Many times, our investment decisions can be driven by causes such as:
This might sound cheesy or far-fetched, but managing emotions is one of the most important parts of successful investing. That’s what emotional management really means, to map and account for your emotions.
To conclude this blog post, we have listed the most important of the above-mentioned investment questions and added more standard investment questions that can help you make better choices.
You can use all of these questions as a checklist before making an investment decision.
Here is the list of all the important investment questions:
Well, we hope all these investing questions will help you stimulate your analytical mind, become a better investor, and better in business in general.
Just make sure all these questions won’t lead you to analysis-paralysis. In the end, you must gather the courage to invest your money, just be sure to do so cleverly.
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