Last week, I caused a minor stir with my column: I brought up the story of the innocent 'investor' who lent his money to a commercial company at a cut interest rate (and almost lost the principal as well).
Judging by the number of emails I received, it turns out that there are quite a few who were touched by the story (hopefully not personally).
Amazing, but most of them thanked me for bringing the story, but asked for instructions on where to invest.
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As promised, all applicants have been responded to, but I will try to put down in writing some dos and don'ts.
Before we begin - a warning:
There is no way to give clear and unambiguous rules that detail guidelines for investing and/or avoiding investing. Each case must be examined on an individual investor and investment basis. What is suitable for one person is not necessarily suitable for another. After one recommendation, the same recommendation is not necessarily still valid later on.
Despite this, and in light of the many requests, I will try to provide clearer direction:
• Do not invest (in any way) money that is not available. Money that you need for survival is not suitable for investment. Money for investment will always come from available funds that come beyond the family (and/or business) flow and are not supposed to be used for our daily lives.
• If you have money available for a certain period of time (until your child's wedding/until you buy the apartment, etc.), do yourself a favor and take a relatively large safety margin between the time the money is supposed to be returned and the time you need it. The disaster that will occur at the time you actually have to transfer your money, while it is still stuck in the investment, will be very painful.
This rule is especially true if you are purchasing an asset or product that you need to return the profit (or at least the principal) after selling. Always keep in mind that it takes time to sell a product or asset. And the more stressed you are to sell it, the lower its price will be...
• Remember: As the profit increases (percentage, interest, etc.), the risk increases. On a bank deposit (where the chance of losing the principal is absolutely zero), you will receive fractions of a percentage of profit/interest. On a "risky" investment, where there is a possibility that you will lose part of the principal (or all of it), you will receive a promise of a higher interest rate. Such investments are suitable for those who really will not die if the principal goes up in smoke...
• Examine the market and competitors. It is not possible for a commercial company (or a specific product) to present you with an imaginary return potential, while the entire industry or competitors are floundering with almost no profitability.
Just as Osam cannot earn 15 NIS on a bag of Bamba, it is also impossible in the world for an apartment in the US to achieve a 4% return per month, throughout its lifetime.
• Learn a little about the field. Before you invest in growing lettuce in the territories, call an agronomist and ask for a paid consultation. I'm sure you'll hear interesting things that will shed light on the presentation you were given (lettuce grows everywhere, it doesn't need to be grown in the territories.)
The cost of an hour of professional consultation will cost you a few dozen or a few hundred shekels - a minimal "loss" compared to the disappearance of all your money.
• We recited the words of the Mishnah in Pirkei Avot: He who wants to lose his money, let him hire workers and not live with them. If you are offered an investment that you cannot inspect (literally) - do not invest! And even in this, I see no possibility of shortcuts. Visit the place. Examine the product. Meet the workers. Observe the property. Dig in the ground to look for oil.
Don't rely on Photoshop slides. This rule applies even if you're not going to be an 'active investor').
• Examine the bidder's history. While there is no guarantee that a successful businessman or serial entrepreneur will succeed again and again, it is definitely better to avoid investing in someone who has gone bankrupt several times before.
• If you are offered to participate in an existing company that already has investors, ask to meet them in person. Learn from them about the reason that motivated them to invest in the place, and/or whether they were also told that new investors are being brought in. Their surprise at the mere meeting with you may allow you to save your money. (By the way, every official corporation has a full breakdown at BDI or D&B of the partners and/or stakeholders. It is worth "purchasing" such an information output, which also includes the company's obligation level in all banks in the country).
• Demand a well-organized business plan. A plan written by a reputable firm is highly preferred. If you don't know how to read a business plan, send it for review to a business consultant who will give his opinion on what is written in it (or a senior accountant).
• A tried and tested spell (and I have seen real miracles with my own eyes) to receive blessings and advice from the great men of Israel. As the sages said, he who takes advice from the elders does not fail. I have witnessed with my own eyes quite a few cases in which my client's rabbi asked to wait, or did not recommend (or gave a blessing for success) and his words were fulfilled in a way that was not right and sometimes even contrary to nature. And dal.
I hope I helped you this time too.
In any case, I am at your disposal for any questions or concerns, and God willing, every applicant will be answered personally.
The email address for questions, requests and advice is as usual: [email protected]
• The writer is the CEO of the consulting firm M&S, which specializes in business consulting, raising business credit, building and improving sales departments, valuations, and recovery plans. He is also the founder of the 'School of Business Management - Startup'.
