When many people think about investing, they have one major question in mind, “How much money am I going to make?”, and they usually don’t consider what they may have to give up in order to get their desired profit. However, natural law dictates that in order to receive, you must be willing to sacrifice something in return.

If you want to create wealth from investing, you will have to make some compromises in order to achieve your objectives. You’re not going to be blessed with wealth from this source without paying a price for it.

While it may be relatively simple to determine the direct expenses that can accompany an investment transaction, there are some hidden costs which may not be that obvious. Let’s look at some of the areas in which you must be willing to give and take in order to get the best from investing.

Dedicate time to learn
Some persons believe that investing should be a fast-track method to achieving great wealth. They are always looking for the next get-rich-quick scheme that will take them out of their financial misery and set them firmly on golden ground. The reality is that to become successful, you have to spend a lot of time getting educated about the process of investing.

If you’re not prepared to forgo some leisure time to focus on learning about investments, then you’ll probably never find that pot of gold you desire. Keep yourself informed by reading newspapers, books and magazines, and subscribe to internet sites that provide up-to-date investing news. Don’t be afraid to ask questions at seminars and make use of investment professionals’ knowledge.

Commit personal effort
In addition to the requirement to spend time learning about investing you must be personally involved in the entire investment process. Investing is not a spectator sport where you can get great results from passively standing on the sidelines. You can’t win big in the investing race without actively participating in it.

The most profitable investors are those who not only understand investing, but who are able to make informed decisions about which assets to purchase and when to sell their investments. In fact, those with significant wealth become career investors, as they place as much emphasis on their investing activities as most people do on their regular jobs.

Sacrifice immediate gratification
Serious investors display a strong sense of commitment as they decide to defer the immediate gratification of consuming their money. While others may choose to purchase items or spend on activities that bring direct pleasure, investors are willing to put aside their funds with the hope of gaining a future profit.

If you want to eventually create a comfortable lifestyle from your investment profits, you have to be disciplined in assigning some of your current income towards buying assets. This money should not be needed for paying bills or for emergency purposes. Even if you start investing with a small amount, with a consistent approach it can grow significantly over time.

Accept possible risk
When it comes to investing, most people like to think about all the gains that they would like to make, but few are comfortable with the thought of losing money. While you expect to make a positive return, the opposite must also be considered. The cost of loss cannot be separated from the projection of profit when you are contemplating an investment.

The possibility of getting a negative outcome from an investment, or having a different result from what was expected, is called investing risk. Risk is the ultimate price that investors must be prepared to pay in their quest to achieve their investing goals. The risks that are inherent in all investments must be carefully considered before committing money to any venture.

There are three main outcomes that investors want to achieve: they want to ensure that they can get back their original investment amount, they want their initial principal to be increased to a larger amount, and they may want to receive an income from their investing efforts. However, investors must be willing to assume the possible risks of not attaining these basic objectives.

Let’s say that you have $200,000 that you wish to commit to some endeavour. Your friend approaches you to invest in her business by helping her to purchase stock for her clothing store. In return for your investment, she promises you part ownership in her budding enterprise and a monthly income from the profits.

Unfortunately, after new items have been purchased with all of your investment capital, a fire destroys the store and its contents. You later learn that your friend did not have any insurance, and your entire investment is lost. While your plans contained an opportunity for gain, the possibility of loss was closely intertwined; so with investing, you can’t have a return without some amount of risk.

Next week we will examine the concept of investing risk in greater detail.

Copyright © 2011 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, August 25, 2011

Read another article about the Emotions of Investing

Don’t Let Fear Hold You Back From Investing

DON’T MISS MY NEXT ARTICLE! CLICK BELOW TO RECEIVE IT IN YOUR EMAIL:

Cherryl is a financial consultant and coach, founder of Financially S.M.A.R.T. Services. See more of her work at www.entrepreneursinjamaica.com and www.financiallysmartonline.com. Contact Cherryl