The ‘secret’ to investing success

Reading a lot of personal finance and investing material, I get the distinct impression that there are a class of investors out there who are looking for the ‘secret’ to investing success. These are the people who might not be earning a fortune. The ones who might save £100 a month. The ones who watch people like the Candy Brothers and wonder ‘why not me too?’. They squirrel their money away, month after month, and after a few years are wondering why their net worth hasn’t gone through the roof. Of course, most people know that when they give their money to a banker, their investments aren’t likely to transform them into overnight millionaires. Following this train of thought, it makes sense that there is some sort of ‘secret’ to investing success which regular investors aren’t aware of.

Look at how many wealthy people made their money. They acquired a sum of capital and then placed that capital in the hands of skilled entrepreneurs who used it to create a successful business. When I look at some of the wealthy people that I know and work with, all of them (bar a handful) are entrepreneurs and business owners. Some have sophisticated technology businesses, others make their money in property or retail. Many of these entrepreneurs have provided outstanding returns for their investors; some of those investors became wealthy purely as a result of placing some of their capital in a single venture.

Of course, there are a range of factors to consider when investing with an entrepreneur. For one thing, there’s risk. Most ventures fail within their first few years and as an investor that can mean the loss of all capital invested. This makes due diligence all the more important! Earning and acquiring capital requires many sacrifices, so be sure to place it in the hands of a well-vetted entrepreneur with a proven track record of success – not a drunk guy you met at the pub.

Secondly, small investors often don’t know where to find good investment opportunities. The thing is, there are hundreds of opportunities all around you; many of whom are just crying out for capital in pursuit of a profitable enterprise. Get out there, start building your network and invest in your financial education!

Ultimately, anyone that’s trying to sell you a ‘secret’ to investing success is probably just after your money. In my experience, there isn’t a single ‘secret’ or mysterious methodology to creating investing success. There are basic principles, certainly; due diligence, diversification and building a strong network are just some of them. At the end of the day though, the idea of a ‘rinse and repeat formula which is guaranteed to make you a rich investor? It’s probably more likely to make you a very poor one…