Editor’s note: This article was first published in July 2010. Its sector tips, such as pharmaceutical companies about to launch a drug and companies moving into renewable energy, reflect 2010.
I’ve received a large number of emails at my personal address asking for advice on investing in a company or security that offers a high return while also being a safe investment. First of all, thank you for your trust. But I have to say that what you’re looking for probably doesn’t exist.
People who know me know that I look at everything objectively, and I don’t like to steer anyone, even in good faith, into an investment that could later hurt them financially.
Although, thank God, my investments have been successful to this day, investing isn’t really my thing. Business is, and business is another way of investing.
Even so, I’ll try to give you a few pointers in case they help. Most of you will know, more or less, that any investment offering a higher return also carries a higher risk.
When it comes to safe investments, I’ve always understood that to mean fixed-term bank deposits. Clearly, you won’t get rich with this kind of investment, but it’s a good way to start since, as we were saying, you don’t need advice.
Now read this carefully. Any investment you make through another person, such as a broker or a company that invests in Forex, won’t necessarily be a scam, but with the best of intentions they may encourage you to invest, believing it’s a safe bet, and be wrong. That has happened and can happen, and I repeat, without any ill intent.
The most profitable investments you can make are in small companies with the potential to grow, or in companies about to launch an innovative product. In the six months after the product comes out and starts selling, you can easily double the value of the shares.
You might be interested in reading about the advantages of investing in a company that’s about to merge with another. In my view, 7 out of 10 mergers are profitable and “safe” investments: the advantages of investing in a company merger.
Pharmaceutical companies about to bring a new drug to market, and existing companies that will become part of the renewable energy sector, are two kinds of stocks worth finding out more about.
To invest, you need to know not only the numbers but also the people who run the companies and, if possible, their business strategy. Investing without studying a company is like filling in a lottery ticket.
My latest investment was in Nueva Rumasa. I trust the Ruiz-Mateos family, which doesn’t mean they can’t fail. It’s an investment with an 8% return that carries a risk I’m prepared to take.
If it helps, you can read what an investor analyzes before investing.
Sometimes the best investment you can make is in your own business. At least the return on that investment depends on you and your management skills, not on the way other people run things.
As a final piece of advice on investing, I’ll simply tell you to draw your own conclusions by reading this article on the businesses of the future. If you find a company that’s starting to innovate in these sectors, it will be worth studying the return on the investment.
Thanks again for your trust, and I hope this has been of some use. I’ll leave you with the 7 levels of investors so you can better see where you stand: the 7 levels of investors, according to Robert Kiyosaki.
Featured image: Boubloub, CC BY-SA 4.0, via Wikimedia Commons.
