One important factor which determines the success or failure of your investment is the timing of the investment. When should we enter an investment and when should we exit in order to maximize our profit and minimize our risk?
Although we can never time our investment precisely, and no human can ever do that, but we can definitely identify the best timeframe for investment. To do that, we will first need to understand the Opportunity Curve. The opportunity mentioned here represents various investment opportunities such as business, equity, property, trend and even people. Generally, we can identify 4 similar phases where any given opportunity will go through, as represented by the Opportunity Curve.
Phase 1 is the Startup Phase, where the opportunity is born and starts to grow. In this phase, we can see the growth is less steep and at a slower rate. Phase 2 is the Exponential Growth Phase, where the opportunity picks up enough momentum to grow exponentially. Phase 3 is the Saturation Phase, where the opportunity begin to lose momentum, growth is slowing down and even saturates. Lastly, Phase 4 is the Declining Phase, where the opportunity starts to diminish and will be finally lost. Phase 4 may not always comes after Phase 3, it can also happen after Phase 1 and Phase 2.
Looking at the Opportunity Curve, we immediately can identify that Phase 2, the Exponential Growth Phase is the best timeframe to be in an investment, because we can achieve much better growth in shorter time frame. Also with the strong growth momentum, the risk of failure is much lesser.
As a ‘lazy’ investor, we want to grow our wealth passively without much effort and worries. Hence, our strategy is simple, we just need to identify opportunities around the Exponential Growth Phase, so that when we put our money down, we can just ride on the strong growth trend and let our wealth grows along with it by itself.
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