Topic: How To Invest

What is Pat’s commentary for the week of August 5, 2020

Article Excerpt

Before you buy an investment that is not yet making money, it’s best to look at it from a “first principals” or “financial physics” standpoint. You can start by asking yourself some simple questions, such as: “Where’s my profit coming from?” “What’s special about this investment that makes it capable of profiting from this opportunity?” “How long will it take for profits to start flowing?” When you go back and analyze investments that lost money for you, you’ll often find that you failed to ask these questions. Or, you may have asked them, but jumped to conclusions to provide the answers. It’s much better to maintain a healthy sense of skepticism. These “foregone conclusions” come naturally when you fall in love with an investment. They make it all too easy to plunge in without considering the risk. For example, when Canada legalized cannabis use, some investors took it for granted that companies going into the field were bound to make a lot of money. After…

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