What is the ‘magic triangle’ of money investment, and why it is one of the most important lessons you could learn as an investor?
when it comes to how to be financially independent or how to become an entrepreneur through your money investments, there is one very important lesson every investor should learn — the magic triangle of money investment.
Whenever you make a financial investment, you’re always looking to achieve one of the three goals. The three goals you need to consider are profitability, security and liquidity. This is the ‘magic triangle’ of money investment.
Sounds simple, right? Just find an investment that offers all three, and you’re ready to go. Unfortunately, achieving all three factors in one investment is virtually impossible.
The Magic Triangle of Money Investment, by Maxim Bederov
As investors or entrepreneurs, we’re all seeking that ‘perfect investment,’ which would allow us to live in comfort for the rest of our days. Unfortunately, it’s very rare to find an investment that offers you all three factors at once. Instead, you may need to choose which three factors of the magic triangle is most important to you.
An investment that is high in yield will usually offer you low levels of security. You may have to take a certain amount of risk on board for the opportunity to get a higher return on your investment.
If you can absorb a loss then high yield, high return, high-risk investments could be perfect for you.
If you prefer to play it safe with your investments and choose security, you’re going to have to settle for an investment that offers lower returns. If your intention is on the long and safe investment strategy, and you’re in no hurry to see a big return on your investment, then high security is a good strategy for you.
The final factor which you need to consider with your investment is the liquidity or how quickly and easily you can get your money back out of your investment. If you lock your money into an investment for a long period, you may be missing out on other, potentially more profitable opportunities.
The Magic Triangle Conclusion by Maxim Bederov
If you find all three factors, profitability, security, and liquidity in an investment opportunity, then grab it with both hands. Using the magic triangle of investment, you’ll be able to prioritize which aspects of any investment are the most important to you.
As a financial specialist, I have wrestled with the magic triangle many times in the past when considering any new investment opportunity. Being an entrepreneur is never easy, but that is what makes it so rewarding.