The merits of investing early are obvious. Like with everything else, buying something early or getting in on the ground floor of an investment or business before it catches on with the public is not only cheaper but also more rewarding.
Buying something at $1 that later sells for $30 is more profitable than if you had purchased it for $5 or $10. The early movers can make more money, but obviously, they take on more risk. They are investing at a stage where a product or service is typically unproven. Those coming in later at a higher price are usually investing in a known commodity.
Investing early can be risky. Sometimes it takes a leap of faith, but the rewards can be tremendous.
Serial entrepreneur and investor Gary Vaynerchuk has some advice for mitigating the risks of investing early since he knows a thing or two about making early moves. Vaynerchuk built his net worth estimated at around $160 million by investing early (pre-IPO) in companies like Twitter, Tumblr, Uber, and Snap.
Gary Vaynerchuk will be the first to admit to not knowing the first thing about Wall Street, but what’s his tried-and-true method? Invest in something you like and understand — and be patient, he says.
We can all learn from Vaynerchuk’s patience. He invests for the long-term, not jumping from stock to stock by the day or even by the hour like day traders. He lets his investments play out. It’s worked for him.
Besides patience, Vaynerchuk suggests that investors invest in something they like and understand:
“A lot of people historically have done fairly well investing in companies they just genuinely like, whether it’s been Starbucks or Nike.” -Gary Vaynerchuk, Co-Founder, and CEO of VaynerMedia
Warren Buffett is famous for avoiding technology stocks. Back during the dot-com boom, while everyone else was piling into dot-com stocks, Warren Buffett avoided them, explaining, “All you people piling into dot-com stocks must be much smarter than I am because I just don’t get it!”
Buffett’s approach to avoiding markets he didn’t understand served him well in that instance and every other instance since we can all agree he’s done pretty good for himself.
Investing in something you understand and like makes intuitive sense.
If you understand it and like it, chances are others will like it as well:
”I don’t like to read long blogs. Microbursts of information sound like a good idea.” Enter Twitter.
”I don’t want to have to remember to erase my texts. You never know who might stumble on them one day. What if texts could disappear as they’re read?” Enter Snapchat.
And the list goes on…
Don’t be afraid to invest early. The potential rewards of moving early can be substantial.
Some may consider investing early risky, but if you invest with a long view and invest in something you understand and even like, according to successful investors like Warren Buffett and Gary Vaynerchuk, this will improve your odds of succeeding significantly.