The subject of investment and investment activity has always been something mysterious and complex. On the one hand, there are vivid examples of how it has been possible to earn hundreds of thousands in a short period by investing several thousand dollars in a risky and completely new direction.
On the other hand, many novice investors have invested their savings in long-established companies and drop their money. Who is the investor? Which segments are more profitable to invest in? What qualities should a successful investor have in order not to lose funds? The business person and the investment expert Dmitry Leus helps to answer these questions.
We have asked him about the understanding of who the investor is and when it’s better to start investing.
The interviewee explains that, according to classical definition, an investor is a person who puts money into something in order to make a profit. At first sight, it’s very simple and understandable.
But Dmitry Leus develops a theme and defines several basic concepts which are very important. Speaking about doing business and categorizing business entities, the expert lays emphasis on three main concepts – a businessman, an entrepreneur and an investor. For many people, it sounds like the same thing, but in reality there is a difference.
Dmitry Leus compares the businessman with a good and diligent master, who either has got an understandable and effective business, or uses the methods or approaches proven to be effective at the heart of business management. If this statement is transformed into the formula, it looks like this:
to see —- to copy —– to earn a profit on this
A businessman is a profession just like a doctor or a teacher. And almost everyone can master it like any profession. Nowadays there are enough offers and opportunities in the educational market.
Dmitry Leus states that recent researches have shown that only 5% of the population in the world has so-called business acumen. That is to say, these are people who look at the world a little differently, who see opportunities where they are not noticed by others.
This is a kind of predictors of the business future and “voodoo” of potential niches and markets. At the same time, the creation of new niches and markets is their property. It is said that this ability is innate and it cannot be developed, but Dmitry Leus doesn’t agree. The expert assures that if someone has succeeded in this, others can also do it.
It is just necessary to be able to see the possibilities and use them correctly. Entrepreneurs are characterized by creative ideas, an unusual and original approach to solving problems and even the fanatical faith in those things that they do.
Turning to the investor, Dmitriy Leus claims that in his understanding it is a person who, as well as an entrepreneur, looks at the world through the prism of opportunities, but relies on the analytics when making a decision and knows how to deal with risks correctly.
The interviewee quotes, “To become a good investor you should have knowledge that cannot be gained at the University and experience that is terrible to get, risking your savings.” This quotation fully explains who the investor is.
Referring to the second part of the question, Dmitry Leus identifies several points that are necessary for starting the investment activity.
The first one is the investment capital. This is a part of savings of the person that he/she decides to invest in order to get more financial benefits in the future. Investment capital can be defined as a certain part of the excess of the person’s income over his/her expenses or the state of financial stability. Dmitry Leus, however, doesn’t recommend investing in case of the lack of availability of resources.
The second point is skills and ability to manage risks. Investment activity is a double-edged sword. On the one hand, it is an opportunity and a prospect, and, on the other hand, it is a risk and a limitation.
Therefore, if the person does not know how to manage risks, if he/she does not assume 100% responsibility for the decisions that have been made, then the investment activity is not recommended. Just yet! But if this person still wants to try to take risks, then the risk should be paid off. And the justification is based on a clear mathematical calculation and “feeling”.
“Feeling” is the next important aspect and advantage of a successful investor. Dmitry Leus says that his opinion can be challenged, and he just expresses his own opinion. If the expert does not react to the proposal, then most often he does not take part in it. Even if logic and mathematics suggest the opposite!
The fourth moment is the evaluation in taking a decision. Leus explains that there is a rule of “72 hours”. If after 72 hours when the person has learned all the details and information about the investment object, he/she is still ready to invest, then it does make sense to invest in the project.
Another rule is that the level of profitability of the investment corresponds to the level of risk. Therefore, if a person invests in a project with a high profitability and at the same time it is said about ironclad guarantee – then it’s necessary to think about this.
And the last point is the investment strategy. It is not desirable to invest if the person doesn’t understand “What end?” and if he/she doesn’t have a developed investment strategy. It is important!
The second question is related to the desire to find out what risks are inherent in the investment business. It has also been asked if there is a statistic of% successful investments and what is this percentage.
Before talking about the risks, Dmitry Leus says that any business is a one-way road! If the person chooses the way of being a business person or an investor, then, to be successful, he/she should never miss a trick! This person must constantly be concentrated and focused.
But Leus admits that people should not confuse this with tension. It is important! If the person constantly straining in making a decision, then something he/she does is not right. It’s necessary to stop, think about the wrong actions, and eliminate them and only then continue.
Referring to the issue of risks, the expert says there is one main risk in the investment business – this is the risk of losing funds. At the same time, D. Leus mentions several reasons for the loss of funds:
1. Miscalculated risks – at the stage of risk assessment, insufficient attention is paid to the miscalculation of risks and the decision is made on the basis of “feeling” or with the emotional impact.
2. Changed market conditions, which leads to drastic changes and redistribution of the market share or market entry of a new product.
3. Force majeure or something people cannot predict and affect.
Dmitry Leus also states that, on the percentages of successful investments, there is no specific statistics for the reasons that have already been mentioned.
Someone has 50/50, i.e. every second transaction turns out to be failure.
Someone – 90/10 (that is better than 10/90).
In expert’s understanding, a good investor has a ratio of 70/30 – successful and lucrative projects to those projects where people lose money. But Leus is confident that the loss is not bad, because it teaches a lot. Put in other words, if you lose don’t lose the lesson.
The last question concerns the differences of the investment business in Russia and Europe, as well as which market segments (or niches) are most popular (attractive) in Russia today and why.
The interviewer explains that global trends affect regional markets and influence on them approximately equally worldwide. He considers some of them:
1. The increase of the budget segment. It can be observed in Russia, and in England, and in the United States. This concerned the real estate, retail, and many other niches of the business. And this is predictable – the incomes of the population are decreasing and they are becoming to make rational purchases that satisfy essential needs. Here is a modified Maslow pyramid! Therefore, it is quite logical that the focus is shifting to investing in the economy class now.
2. Cost reduction (optimization). This is another global trend. At the same time, this is the direction for investing! Systematization of business, automation of processes, usage of advanced soft solutions, reduction of personal dependence and cost optimization are the components of actions aimed on the one hand at increasing profitability at a given level, and on the other hand reducing the cost of consuming goods or services.
Leus says that many people do not see this as an investment attraction, but he supposed that this is a huge segment and a direction for investment.
3. Reduction of hydrocarbon dependence. What is now being observed is a turning point and a transitional moment, when traditional sources of energy are gradually shifting to the second plan and, in fact, become “supportive.” Therefore, everything that is connected with alternative energy, are interesting objects of investment. The expert assumes that there will be no abrupt transition to “alternative” energy only, but one cannot ignore the fact that this is already happening.
4. Real estate is preferred more than investment in IT. And this is due to the size of the risks and the stability of the segment. Although there is a sufficient number of successfully implemented investment projects in the IT sphere with a very heavy rate of the earning power.
IT segment is currently developing so dynamically that it often happens that yesterday’s idea and uniqueness is now implemented by someone else and completely loses its position in the market. Therefore, many people prefer to invest in “old and reliable” than in “new and promising.”
Perhaps, these points are the main directions which will be relevant in the near future from the point of view of investment attractiveness, including Russia. Investment activity is a kind of lifestyle, with a constant searching for perspective niches and new activities that are relevant at the moment in the market. Therefore, talking about successfulness and success in investing, it is important to be constantly up to date and feel the situation.
To sum up, being in the mainstream and feeling the situation – is the main philosophy.