What Business Should I Start?. Rhonda Abrams
Watch out for . . .
E-Type: Investor/Owner
Overview
Money makes money. At least it can—with the help of an Investor/Owner E-Type.
Some people are fortunate to have money they can put to work for them. But even those without their own money may have friends, family, colleagues or acquaintances with money, seeking additional ways to invest their wealth. If so—and you’re willing to raise money from those people—there’s another option available in addition to starting more “traditional” businesses—becoming an investor or owner.
Whether you buy real estate or vending machines, invest in stocks or second mortgages, being an investor/owner can offer you a very nice lifestyle. You can leverage your money (or the money you raise) into additional income without necessarily having to show up for work every day. When you do work, your time is typically very flexible.
The Investor/Owner E-Type is good with numbers, good with money, willing to take carefully calculated risks, and has available (or is able to raise) investment funds. The risks and rewards can be great.
Being an investor/owner can also be interesting and exciting. You have the opportunity to learn a great deal about one specific field—the area you choose to invest in. If, for instance, you choose to invest in real estate, you’ll have to stay current on property values, mortgage rates, legal issues, and so on, which, if you are interested in real estate, can be very enjoyable.
The downside, of course, is risk. You are using your own—or other people’s—money in the hopes that the financial returns will be greater than more traditional, safer institutional investment options. But there’s certainly no guarantee.
Investor/Owners are comfortable with risk. In fact, they may not consider what they do risky at all. After all, if they do their homework, take steps to reduce risks, and stay on top of their investments, they feel like they’re in charge of their future.
Investor/Owners are also typically independent people. They trust their own judgment (although the successful ones seek professional advice whenever appropriate) and are happy to take the time to do research and make educated decisions about their investments. Many will like the fact that they can work by themselves rather than having to work closely with other people on a daily basis.
Options for this E-Type
Investor: As an investor, you put money into other people’s ventures—whether their companies, real estate, the stock market, even race horses—in return for a percentage of the profits, if any. If the venture does very well, you may make a great deal of money. If it flops, you could lose everything. Obviously, this has a great deal of risk; much more risk than some other options(such as lending). The flipside is that there is potentially much greater reward.
The extent of risk depends, of course, on what you choose to invest in. Purchasing real estate in a growing community is likely going to be much less riskier than investing in a friend’s new restaurant—unless you and your friend know a lot about restaurants and not much about real estate. Remember, this is supposed to be investing, not gambling, so you have to do your homework before sinking money into a venture.
Lender: Another way to use money is to lend it, rather than invest it. You provide money to others in return for a guaranteed percentage of the amount you lend. Lending can be less risky than investing. Your risk is limited to how well you screen your borrowers and whether you get sufficient collateral to protect yourself in case they default.
The downside is that your return may not be as great. As long as the other person pays you back, you know exactly how much money you will make. If you lend someone money to start a new business, you will make the same return whether their business is a huge success or a flop. Your potential rewards are limited, but so is your risk.
Keep in mind that many money-lending activities are regulated. You can’t just start lending money to people for second mortgages, or open a pawn shop. Investigate the rules in your state before you start writing up loan documents.
Owner: A time-tested way of making money is by owning something. As an owner,