What is investing

… and how to learn it?
Continuing my thoughts from the last post, I think investing is using a set of ressources in order to create something else, which value is bigger than the sum of used ressources.

And to be successful in investing you have to learn how to
determine the value of ressources and results,
estimate all unknown risk factors that may have negative influence upon results and
decide whether the possible higher value of results justifies taking that risks.

Knowing this is all it takes to be an investor. Sounds easy. I just wish it was so. Nothing is in life…

For me, investing is anything that takes my ressources (money, time, effort) and returns something of higher value.

Yes, playing in a casino may be seen as investing, but with tiny chances of success (astronomical risks). So it is rather a poor investment.

Buying a car, going to work, spending time in front of a TV scratching your balls… the whole life can be seen as an investment! It's good, when it pays off, or not, when it doesn't. Next time you do anything ask yourself "What is it good for?". It's amazing how everything takes another shape under this perspective.

Let's take "eating a hamburger":
Resouces: few dollars and your time to buy the hamburger.
Expected result: energy for your body; good taste
Risks: contributes to health problems which may cause future spendings and even death.

So if you calculate the amount of risks and how each hamburger contributes to it, you may chose another energy source that also tastes good, but has far less risks. Therefore, a hamburger is a bad investment! :-)

December 1, 2006 | Filed Under General 

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