How to Identify Opportunities (And Make Your Own Luck)

September 2, 2011

Often times in life, we associate the successes of others with luck.  If someone lands the perfect job, finds their soul mate, or wins the jackpot, we automatically think that luck is on their side.  In the investment world, however, luck is not the only factor involved.  In today’s show, we share some great tips for creating your own luck by spotting opportunities that other investors overlook.

The Millionaire Next Door (a favorite here at The Money-Guy Show) outlines 7 facts about the millionaires in this country.  Two of those directly relate to today’s podcast:

  • They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
  • They are proficient in targeting market opportunities.

This means that the most financially successful individuals in America do not randomly invest their money.  They spend their time doing research and they have a mindset which allows them to spot great market opportunities.

Some key learning points:

  • Look for opportunity in adversity.  This means that when the world cries that the sky is falling, you look for opportunity.  One of our favorite Warren Buffet quotes is “You should be fearful when others are greedy, and greedy when others are fearful”.  Having that contrarian point of view can allow you to take advantage of undervalued assets when everyone else is attempting to flock to safety.  To be clear, we don’t believe in market timing.  But, we do believe in over-allocating in sectors that are undervalued and reallocating when holdings become overvalued.
  • Understand the fundamentals or analytical facts.  Knowing the fundamentals of an investment or company will give you the confidence to make moves when others are hesitant.  If you have the concrete facts, investing is more a strategy than a leap of faith.
  • Patience, patience, patience.  Do not try to force an opportunity.  Do your research, sit back, and wait for the opportunity to present itself.  You don’t have to make a move just to be moving.  In addition, don’t get cute with the numbers.  If you are always waiting for a price to go down a little more (then a little more), you may miss an opportunity altogether.  If you recognize a great deal, take advantage of it.
  • Allocate your resources well by keeping liquid funds.  You have to keep some money on the side so you can take advantage of opportunities when they come around.  After all, it does no good to find a deal if you can’t act on it.

Hopefully these tips will help you identify opportunities when investing in the future.  If you have been “lucky” enough to take advantage of some good opportunities in the past, feel free to share them below or on our Facebook page.

In addition, please go check us out on our brand new YouTube channel!  We will be regularly posting mini podcasts as well as “The Money-Minute”, our new platform for answering your financial questions.  If you want your question to be featured in a video, email it to [email protected]!

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