Bad Investments
"Do we have bad profits?"- Jonathan L. Byrnes in Inc. article 35 Great Questions
Last week I wrote a post about how bad business is bad for business. I believe that we must treat employees and customers as human beings and behave in a way that would reward us with return business. Anything else and we go out of business.
This quote adds another dimension. What if we are doing the right thing but it is not profitable? What is the true cost?
Opportunity cost is the cost of not doing A by choosing to do B. To maximize returns then one would chose the higher rate of return option. But what is B looks more profitable initially but then the true cost and profitability are not what was believed?
We need to believe that when we convert data into information that the information is correct. Based on the best information possible we pull the trigger and make a choice. Once the choice has been made we need to have a review period when we decide whether to continue with the choice or abandon it.
What is that point? Well for investing, I use the 8-10% rule. When an investment drops by 8-10% I will sell it. This minimizes my loses and provides capital to invest in something that would give a better return.
For projects this becomes difficult. Once they are funded fully then you can kill it if you believe that the execution will cost more than expected or the business case is no longer valid.
Today's question is:
"How do you know when an investment is going bad?"
"Do we have bad profits?"- Jonathan L. Byrnes in Inc. article 35 Great Questions
Last week I wrote a post about how bad business is bad for business. I believe that we must treat employees and customers as human beings and behave in a way that would reward us with return business. Anything else and we go out of business.
This quote adds another dimension. What if we are doing the right thing but it is not profitable? What is the true cost?
Opportunity cost is the cost of not doing A by choosing to do B. To maximize returns then one would chose the higher rate of return option. But what is B looks more profitable initially but then the true cost and profitability are not what was believed?
We need to believe that when we convert data into information that the information is correct. Based on the best information possible we pull the trigger and make a choice. Once the choice has been made we need to have a review period when we decide whether to continue with the choice or abandon it.
What is that point? Well for investing, I use the 8-10% rule. When an investment drops by 8-10% I will sell it. This minimizes my loses and provides capital to invest in something that would give a better return.
For projects this becomes difficult. Once they are funded fully then you can kill it if you believe that the execution will cost more than expected or the business case is no longer valid.
Today's question is:
"How do you know when an investment is going bad?"
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