The concept of investing is not limited to funds and assets only. Rather, it extends to self-investment, such as training, development, and education.
There is no doubt that the investment decision will take into account the investor’s ambitions on the one hand and his apprehensions on the other hand.
For a conservative investor, his apprehensions always lead him to the direction of investments that are fairly safe but have relatively low returns. These investments will not remove the owner from his current financial circle at all, even if they are justified.
Investing in sovereign bonds and banks, and if it is safe, the returns earned annually do not cover the annual rate of inflation in the country.
Likewise, when we talk about investing in oneself, the unconscious tendency to study specializations with relatively secure jobs keeps people within the circle of relatively limited income and security.
To understand the secret of successful investment and its timing, we must understand the life cycle of the company from the beginning.
Company Life Cycle:
Corporate life begins with incorporation and ends with liquidation or acquisition, passing through the stages of the emerging company, with limited liability and participation.
In the event that the company succeeds, its market value will double during its life period, as it achieves current revenues and gains and perhaps a promising future.
In the start-up stage, in which the management has proven its initial success in achieving revenues, the company lives in the first stage of doubling its market value, as it becomes attractive to venture investors.
At this stage, the entrepreneur can sell or accept partnerships with investors to ensure the company’s expansion and move to the next stage. And here the entrepreneur makes the first market profit for his efforts. In exchange for the enterprising investor obtaining a stake in a promising company and bearing some risks.
In an earlier stage, when moving to the joint-stock company stage, the company would have achieved greater success and reached the stage of relative stability.
This stage is considered the most important stage in the history of the company where the market value of the company jumps tens of times, and then the former entrepreneur and the current investor achieve fictional market profits, and a share of the company’s value is offered to the shareholders after adding a share premium.
Shortly after the initial issuance, the company’s market price begins to rise gradually as new and late shareholders enter the line.
After this stage, the company enters the stage of relative stability, and the company’s actual and market profits are subject to the actual results of the company and the general economic conditions of boom or depression.
Smart Investment Timing:
There is no doubt that the high return ratio is associated with a high-risk ratio, and here the role of the smart investor begins to hunt new emerging opportunities, as small amounts are invested in promising emerging companies and waiting for the emerging company to turn into joint-stock companies where fictional market profits will be achieved for them.
On the other hand, the average investor will wait until the company reaches the stage of stability, thus losing any opportunity for high market profit and relying on annual dividends or a suitable selling opportunity when there is a temporary rise in the market.
The difference between the two options is very large.
For example, the investor in Amazon when the company was founded in 1996 with only $ 1,000, his share is now estimated at $ 10,000,000 million.
Where the market value of one share has multiplied a thousand times during the life of the company until now.
While those who invest now will not get a guaranteed market profit, but rather will only get annual dividends. (Amazon dividends in 2019 were only 1% of the market value of the stock).
And when calculating the risk factor, the probability of failure of any emerging project sometimes reaches 70%. For those who invested $ 1,000 in 1996 with the assumption of a loss, his loss amounted to only this small amount, while the loss of the conservative investor amounted to double when taking into account the loss of the investment opportunity.
Invest in Education:
The same applies to investing in education.
The unconscious orientation, as we indicated earlier, to educational sectors with relatively secure jobs, will enter the graduate within the circle of relatively secure limited income.
While investing in new educational sectors with a horizon, this graduate will be one of the first to work in this sector (the technology sector, for example).
Thus, he will have more job opportunities and accelerated promotion possibilities compared to whoever enters this sector later.
For example, the fact that the accounting function is relatively stable and required permanently should not be a sufficient reason for choosing this educational sector, because the sector is practically saturated with cadres and will lead to lower wages.
The choice and timing of obtaining high returns and good profits.