Financial Freedom Quick Tip #40: Passion Investing
I will never buy a cow.
It’s not that cows are bad investments.
It’s just, I don’t like cows.
I’ve tried to like cows. I really have.
One of my best friends is a vet. He loves cows. He’s told me just about everything there is to know about them. Despite my best attempts to listen carefully and take it all in, most of what he said just went in the one ear and out the other.
For me, cows are bad investments.
Because I have zero passion for cows, I will never to get to know them well. I will never be able to tell the difference between a good cow and a bad cow.
Investments are subjective
Or at least, they should be. Many people will tell you to be objective about your investments. But that’s just being silly.
You have to like the things you invest in. If you like something, you will naturally learn more about it.
The golden rule of investing is:
Never invest in something you don’t understand.
It will be much easier for you to make effort to understand a potential investment opportunity, if you have an interest in whatever that investment opportunity is about.
Don’t be sentimental
There is a difference between being subjective and being sentimental.
You should invest in things you have a passion for, but it makes no sense to invest in something that doesn’t make financial sense, is a sure looser, or carries higher risk than you can afford to take.
Passion investing doesn’t mean you should ignore the normal indicators that makes something a good investment.
Been there, done that
I learnt this bit of wisdom the hard way.
Just over five years ago I invested in a rental property. I don’t particularly like property. To me, they have quite a lot in common with cows. They’re big, take a lot of maintenance and are difficult to move around.
I finally got rid of my property when I had just had enough, by selling at a rediculously low price and walking away with a 40% to 50% loss.
Property is not a bad investment, but it is a bad investment for me. I don’t have an interest in propery. I’ve never really known what’s going on in the property market. I’ve always found it a tedious and grueling task to try and figure it out.
Nowadays I only invest in things I like and things I know. It feels much better and it’s way more profitable.
This tip is part of the Financial Freedom Quick Tips series. If you want to receive a notice every time a new quick tip is published, you can subscribe to Liberta.
May 8th, 2009 at 07:38 am
Great Post
What about a post on life insurance? I would like to see your opinion on the topic.
May 8th, 2009 at 10:28 am
@Johan
Thanks Johan.
I certainly will post on life insurance (and insurance in general).
May 11th, 2009 at 02:27 pm
[...] Francois tell us why he will never in invest in cows, or other things he isn’t passionate about in Passion Investing. [...]