Dec 21 2008
The Investment Opportunity Time Rule
This is a quick rule to keep in mind when considering an investment opportunity, especially one that you are unfamiliar with.
First, calculate how much capital you are considering investing. Be sure to include the total cost of the investment.
Next, calculate how long it took you to earn the money you are considering using as an investment. Put this in terms of weeks, months, or even years. Typically, I would recommend that you use months as the maximum though it may be more practical when it comes to the next step to put a cap of 12.
Now take the number that you calculated, and spend this number of days dedicated to researching the investment opportunity. I suggested the cap of 12 earlier, but obviously if you are considering investing your life savings of 30 years then you will want to spend at least a month really understanding what you are investing in and why.
Much like the 24 hour rule for large purchases, the investment opportuntiy time rule will protect you from making impulse decisions that end up costing you a lot of money.
