NAME YOUR PRICE
Have you noticed?
We’ve spent a few pages discussing investments without really focusing on prices. Yet, price should be a crucial variable in the equation, right? There’s a strategic reason behind this omission. If you’ve identified an asset with potential for appreciation and are confident it will continue to appeal to future buyers—even amidst fluctuating interest levels—the initial purchase price becomes almost irrelevant.
Is there a situation where the price should be a concern? Yes, if you notice that prices have risen sharply recently, it’s wise to be cautious. This might indicate that the asset is in a price bubble. Here are two red flags to look for:
- The asset qualifies as a store of interest but not as a generator of value. Or, while the value generated has increased, it has done so at a much slower pace than the interest.
- There is a large influx of potential buyers and holders, but few sellers and onlookers, suggesting potential bottlenecks in market dynamics that could abruptly shift.
Similarly, if the price has been plummeting for a long time, it doesn’t necessarily mean an opportunity is just around the corner. As a wise investor once said: “A bargain that remains a bargain is no bargain.” Watch for these warning signs:
- Investor interest has decreased, and the asset’s ability to generate value is declining too indicating a negative reinforcing loop.
- There are many sellers and onlookers, but few are willing to buy or hold the asset.
In these situations, you should pass on, unless you are in a mood to gamble.
But if you don’t have specific concerns about excessive enthusiasm or profound disdain from investors, you should feel confident moving ahead.
However, this doesn’t mean that you shouldn’t aim to secure more favorable terms for yourself. As I mentioned at the outset, you should do whatever is within your power to enhance the potential of your investment, including negotiation. Negotiation is a key tool in your arsenal.
Acquiring an asset at a lower price enhances its potential for profit. However, finding a bargain or negotiating a deal isn’t always possible, especially with fixed or regulated pricing. Whenever the opportunity to secure a good deal or to buy at a discount arises, seize it. If that is not possible, try at least not to get caught up in chasing prices (especially when participating in auctions or trading on the stock market). By securing advantages early or sidestepping unnecessary concessions, you minimize the risk of miscalculations and position yourself for a more substantial return on investment.
And this was the last item to tick on your checklist. The investment world is getting closer.