I see a lot of people “investing” their bitcoin here. I'm using quotes because much of what people are doing is in no way investing. I thought it might help new users to navigate all this if we shared our advice on how a real investment goes. I'm no guru, but I've been investing for about 20 years and have done alright. Sometimes hitting it big other times losing money. Here is what little I have learned.
Questions to have answered:
Is it an investment?
Gambling is not an investment so forget about casinos unless you are buying one. A real investment is when you share the risk and front the money for a good idea. This week I received money for a grocery store expansion that I helped fund. It made 20% in 5 years and we are both happy with that. The store needed capitol and I believed they could do well with their expansion. It could have gone south and then I would have lost money. This is why you never invest money you can't afford to lose.
Where is this business licensed to operate?
If the business does not have a licenses and is not registered then it is simply not a business. If they have a good idea it won't be long before someone steals it and forms a real business. Forget about giving money to such places, you have no legal recourse if they just keep the money. I would also only chose a place in my own country. Other countries may offer no legal help if you are scammed.
Are backgrounds checked and researched?
I want to know who I am dealing with. The business operators, the target market, the business itself. This is when you earn your money. Pour over any resources you can find and develop your expertise in the area your investing. Unless you fully understand it, you will have a hard time investing in it.
Where is the contract?
Without a legal contract spelling out who does what, you have nothing of value. It is the contract that is the investment, IMO. Many sites promise to double your bitcoins or whatever. Ask them to sign a contract legally obliging themselves and see what they say. No serious investment offers a guarantee of profitable returns. Investing will have risk.
Where is the business plan explaining how the money works?
It should detail what the budget is and how the investment will be spent. It should have time lines and projections. It should spell out what happens if things go wrong. Look it over with a calculator and see if you agree. Smart businesses may require you to sign an NDA before seeing this.
So let's say you find a good idea that some smart people are working on. They have a legit business and the plan looks like a winner. You then draw up contracts and do the exchange. At this point it is easy to become a pest investor. That is a guy who hangs out bothering the staff about details of the business. Unless you have a role in developing the product/service, I would recommend getting out of the way. You have committed to sharing some risk for a prescribed time. Now forget about it and move on to the next opportunity. In a few years you will find out if it worked.
Anyone else care to share their advice?
