Wisdom dictates forecast. Yes, the wise have a better ability to foresee future changes in their business environment and position themselves accordingly. This is a fundamental attribute to anyone who wants to be successful in business particularly in investing. It is in this line that any other investor is busy looking for some information regarding the future state of the market they are in.
Blind investing, guided by faith generated from heresy has misled so many youths in Africa, encouraging them to put their little money in seemingly profitable ventures at the moment that at the time of harvest ruin their expectations. How does this ruin come by and is it avoidable?
It is by understanding how this profitable ventures at the moment turn to loss makers in near future that you will be able to position yourself and make sound investment decisions. Majority of people make decisions based on now. They forget the future of tomorrow and this is what makes the difference in future profitability of many ventures. If it is public such and such an investment is making extra ordinary profits, what follows is that every other investor and want-to-be investors want to invest in it. This tendency has the effect of raising the price of raw materials then, so the cost of investing in that venture goes high. If it was some crop, or animal that takes time to rare, it will take the same period of time and therefore during maturity, the many investors who invested it will bring it to the market. At the end of the day, the surplus will bring down prices sharply in the market. Low prices-high cost of investing=loss definitely. At this point the investors will be crying to the government for some help.
Here is the trick, the next time you hear doing something is profitable, hold your horses, analyze the spread of this information. Check for possibilities that the market is shielded by some regulation, or other natural factor so that anyone else cannot come running to invest in it. If you find investing in it is rather very free, forget it, or, be wise enough to invest in supplying the raw materials. In my next article, I will give you some investments that are mostly affected by this cyclical tendency, and reveal the reasoning behind POSITIONAL INVESTING.
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