By J.P. Dahdah, Founder & CEO of Vantage
Although pretty people are great, I am not talking about fashion models. I am talking about investment models. The irony is that regardless of which model I reference, what makes both of them “Super Models” is the value they can produce.
Successful investors don’t leave things to chance. They have very specific criteria about everything concerning their investment. Investment models allow you to work the numbers through various market scenarios to determine if the end result (AKA projected return) is satisfactory based on desired objectives. They also enable you to customize various factors of a deal “on paper” prior to placing real money at risk. And my favorite investment model characteristic is that they eliminate an investment transaction’s emotional component — a leading cause of investment mistakes. Because models let the numbers do the talking, they actually validate if a deal makes sense. This is why increasing a model’s effectiveness requires the input of realistic numbers.
No matter the alternative asset strategy that seduces your investment appetite, you should hesitate in putting retirement savings at risk without a supporting and proven investment model. Start with the end game in mind. If your investment portfolio calls for an alternative fixed income allocation that produces 8% yield (i.e. Seller Financing strategy with residential real estate), maintain your discipline and don’t get distracted with deals promising 16%. Sure, making twice the money seems fantastic, but we are talking about two completely different deals, risks, and strategies.
When you invest with purpose, each transaction fits perfectly into your overall financial picture. If you enter an investment and your only goal each time is “I want to make as much money as possible on this investment,” then I urge you to take a step back, take a deep breath, and rethink your investment plan, because that isn’t much of one. You wouldn’t start a business without a business model that you felt confident would produce your expected results, and the same applies with investments.
Investment models are critical tools for wealth building. If you don’t have any of your own, seek assistance from professionals who specialize in your desired asset strategy and ask for their models. If they don’t have any, then run as fast as you can. Successful investors and professionals alike know the value of using proven models to help make the most informed financial decisions. Happy Investing!!