Around three-fourths of venture-backed startups fail to return investors’ capital, and according to Mattermark data, over two-thirds of startups never raise their Series A investment round. Clearly, when bright-eyed small-business owners tell you they’re sure their business will succeed, they’re probably wrong. So if a friend asks you to invest in their business, I recommend caution.
But how can you exercise caution while still taking appropriate risks in investment? The key is to find a balance between optimism and caution. That leads you to confidence, which is crucial for an investor to sleep well at night. Here’s how to find that balance:
Be Optimistic About What You Can Control
Warren Buffett said, “It’s optimism that is the enemy of the rational buyer.” That’s important to keep in mind when you’re deciding when to invest and what to invest in. Nothing is certain, so when you feel optimistic about an investment, make sure you can back up that feeling with solid reasoning.
While investing involves many factors you can’t control, there are lots of things you can control. As long as you’re making solid decisions in these areas, you can be optimistic about their outcomes:
• What you do with your investments: They say time in the market is better than timing the market. Only you can choose when to sell. When you leave your investments alone, they generally do better than if you pull them out whenever the value starts to dip.
SOURCE: FORBES
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