Why Investing In People See Why They Are Better Assets
Financiers consider employees as expenses and not investments. Many managers prefer to invest in machines or IT systems rather than people.
But it’s a mistake. A financial mistake. A managerial mistake.
One of the most famous economists said it : I am worried about our tendency to over invest in things and under invest in people. John Kenneth Galbraith
For Growth Invest In Stocks And Stock Funds
If you have a high risk tolerance and can stomach volatility, youll want a portfolio that contains mostly stocks or stock funds. If you have a low risk tolerance, youll want a portfolio that has more bonds, since these tend to be more stable and less volatile. Your goals are important in shaping your portfolio, too. For long-term goals, your portfolio can be more aggressive and take more risks potentially leading to higher returns so youll probably want to own more stocks than bonds.
Whichever route you choose, the best way to reach your long-term financial goals and minimize risk is to spread your money across a range of asset types. Thats called asset allocation. Then within each asset class, youll also want to diversify into multiple investments.
Asset allocation is important because different asset classes stocks, bonds, ETFs, mutual funds, real estate respond to the market differently. When one is up, another can be down. So deciding on the right mix will help your portfolio weather changing markets on the journey toward achieving your goals.
Diversification means owning a range of assets across a variety of industries, company sizes and geographic areas. It’s like a subset of asset allocation.
Three Ways To Thoughtfully Invest In People During An Economic Downturn
Shortly after graduating from business school, I visited with the CEO of a company I had worked for while in college. This savvy businessman built a thriving network of incredibly successful companies from a small feed and grain business he had inherited from his wifes family. There were several things I loved about working for that company, including employee care. Our conversation quickly went from catching up to my business school education. He asked me a very pointed question: Ive been wondering, did you learn anything significant in business school that you hadnt already learned while working for our company? While there were clearly many important areas of learning that occurred during my graduate education, my answer was simple and straightforward: Yes, but not when it came to the basics. And what are the basics you learned at our company, he asked? I answered, The importance of gaining a deep industry knowledge and how to take care of your employees. He responded, Exactly!
Much information is available on acquiring industry knowledge, but little on how to build a caring culture. One of the pandemics many outcomes has been the swift economic downturn, which is causing anxiety at every organizational level and resulting in the need for leaders to pay special attention to employee concerns.
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On Finding Honesty In Others
Buffett once said that:
In other words, be careful who you trust. Most of the financial advice offered by equity analysts, advisers, and those in the media should be taken with a grain of salt. Buffett and his partner have long worked with the same people with whom they have long histories of trust and experience. Any good investor should do the same.
Buffett dislikes the excessive fees that make Wall Street richer at the expense of ordinary investors . He claims that:
Your Public Image And Reputation
You can craft a legacy over a lifetime, but Buffett advises us to be cautious and not to throw it all away due to mistakes that could have been easily avoided.
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What Does Investing In People Mean Anyway
I am a leader who likes to get to the root of problems, not just their symptoms, who likes to have words defined so I can fully understand the meaning and intent behind their use. Often, I say to my colleagues and family members define that. It drives most of them nuts, but for me, it takes away the gray area or gaps in my understanding. It helps me start from a point of clarity before I offer a solution, assessment or opinion.
According to Dictonary.com, to invest is to use, give, or devote , as for a purpose or to achieve something. As you might invest time in a garden to take in its beauty or consume its vegetables, or as you might invest in real estate to create more income, you invest in people to gain something that something is to make them better people. Notice I did not say increase productivity or overcome an entrenched enemy occupying a hilltop. No, the purpose behind this investment of your time, talent, etc. is to make a difference in the lives of others.
The Market Can Price Things Wrong
Dont focus on short-term swings in price. Focus on the underlying value of your investment.
From a man who has made a fortune on companies like Apple, American Express, General Motors, UPS, Johnson & Johnson, Mastercard, and Walmart, this is sage advice.
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And, always remember that:
If you pay too much for a company, your investments might take a hit later on.
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Join A Startup Accelerator
“For first-time entrepreneurs with no direct VC connections, I recommend applying to reputable startup accelerators that can lend their network and credibility to your startup. Graduating from a top accelerator such as Y-Combinator or TechStars does not by itself guarantee funding, but it can significantly improve the odds that you would raise a follow-up round at a favorable valuation.”
Buffetts Two Rules Of Investing
For us, Rulers, the first, and I might be biased here but also the best Warren Buffett quote is no surprise to us.
But, it is possible for the stock market to price things wrong! You can find wonderful businesses on sale often.
As Buffett says,
For any consumer of daily financial news, this will ring true. Equity markets swing wildly from day to day on the smallest of news, rally, and crash on sentiment, and celebrate or vilify the most inane data points. Its important not to get caught up in the madness. Instead, stick to your homework.
Always stay rational.
So what is the Warren Buffett Rule?
Never lose money. Stay rational and stick to your homework when researching businesses in which to invest.
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Choose Investments That Match Your Tolerance For Risk
Figuring out how to invest money involves asking where you should invest money. The answer will depend on your goals and willingness to take on more risk in exchange for higher potential investment rewards. Common investments include:
Stocks: Individual shares of companies you believe will increase in value.
Bonds: Bonds allow a company or government to borrow your money to fund a project or refinance other debt. Bonds are considered fixed-income investments and typically make regular interest payments to investors. The principal is then returned on a set maturity date.
Mutual funds: Investing your money in funds like mutual funds, index funds or exchange-traded funds allows you to purchase many stocks, bonds or other investments all at once. Mutual funds build instant diversification by pooling investor money and using it to buy a basket of investments that align with the fund’s stated goal. Funds may be actively managed, with a professional manager selecting the investments used, or they may track an index. A Standard & Poor’s 500 index fund, for example, will hold 500 of the largest companies in the United States.
» Learn more: What are ETFs?
Consider The Four Ms Before Investing
When I talk about the four Ms of investing, Im referring to meaning, moat, management, and margin of safety.
Finding the right investment for you always begins with meaning, and sometimes, this can take time. Becoming an expert on a potential investment option is always more powerful to do before jumping in. Allowing ample time to learn the ins and outs of any company before investing never fails.
Next is a companys moat. Learning how to invest with this kind of durable advantage can increase your odds of investment success.
Then youll look at the management to assess whether or not the company has a plan for continued growth and is run by good leaders.
And lastly, the margin of safety, which is part of Buffetts investment strategy that stresses the idea of buying investments at a high price while searching for opportunities to pay less for something with higher value.
Warren Buffett quotes on the margin of safety state:
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Indulge In Some Soul Food
Volunteering time to help another human being contributes to the greater good. That’s why community involvement is such a powerful way for employees to feel connected to something bigger than themselves. People who take part in corporate social responsibility activities tend to be more engaged in their work, hold more positive views about their coworkers and have higher levels of job fulfillment. A company’s commitment to community and social responsibility creates an environment that makes a difference in the lives of its employees, helps build loyalty to the business and can impact the organization’s ability to attract and retain top professionals.
Recently, Salesforce released a new philanthropy cloud that connects corporations, employees, and nonprofits at scale. Employees can track and take ownership of their philanthropic impact and team up with coworkers to fundraise and volunteer.
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People Make Investing Seem More Difficult Than It Should
In my opinion, this is one of the best Warren Buffett quotes of all time. Many of his investing strategies focus on simplifying the process to make sound decisions.
For example, he is a fan of using the Rule of 72, which lets you determine how long it takes for an investment to double without using a calculator.
Buffett has made the point that you dont have to be a genius to be a good investor. Instead, being a good investor relies on hard work and due diligence.
There are some basic investing rules that you need to learn, but if you follow those rules, chances are youll be successful. Remember to use any of my investing calculators when the math gets tough!
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Streamline The Things You Do Every Day For Huge Gains
Most businesses waste money dont be one of them.
If you look around any business large or small, there will be plenty of things that are done the way theyve always been done but as a business grows and develops, its really important to look at how you work and identify ways do it more efficiently.
Whether youre in the service, sales or manufacturing sectors, there will be things you can do to be more lean it might involve using new technology or just doing things differently, but a fresh view from an external specialist will point you in the right direction.
Its Usually Best To Just Say No
Does anyone else have trouble setting boundaries and using the word no? If so, now is the time to correct the mistake of impulsively saying yes to everything.
Becoming a wise investor means having control over your time and you will never be able to achieve this if you are constantly prioritizing the needs of others over your own. Buffett captures this idea in the following quotes:
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Building Trust Is The Foundation To Good Relationships
When you are INVESTing the time and really listening, you are building trust which is as most of you know, is the foundation to any good relationship. When our team members begin to trust us, they will feel more comfortable and willing to open up. It is important that you continue to reINVEST at this point by lifting them up with recognition and appreciation. The biggest difference from recognition you may have done in the past is that it is more meaningful because of the stronger connection.
Invest For The Long Term
When it comes to successful investing, timing is everything. According to Buffet, the mindset that the market may not open back up immediately should guide each and every single one of your investment decisions. Heres why:
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There Is A Difference Between Investing In People And Their Success Versus Merely Investing In Businesses
There is a difference between investing in people and their success versus merely investing in businesses. I am more focused on the former, and the reason is simple: if your teams are happy, successful, and fulfilled in the workplace, it can create a ripple effect throughout the entire business, and thats the real investment.
The trick is to invest in the early stages of a significant business venture before it becomes cool. Almost always, business ventures will have a great team at the helm that believes in a dream. I am very willing to do the hard work, invest in people, and hold their hands through the scary times when no one else believes in them.
Research shows that companies that take care of their employees lead the way when it comes to customer satisfaction and profitability.
One of my first rules is that I dont invest merely for money. I invest where I can make a difference in the lives of my employees and customersin that order. It is a priority of mine to always make sure to take care of the people who work with me, knowing it can enable them to deliver their A-game and improve customer service. The fantastic people whom I work with at Palmetto Infusion make it their business to care for patients with incredible kindness. I always love getting feedback from clients who say they feel like family when visiting one of our clinics.
CHOOSE YOUR WORDS CAREFULLY
There are a few essential things to focus on when investing in people:
Integrity Drives Investment Decisions
The truth is that while virality, mass appeal and urgency lead campaigns to success in the world of rewards-based crowdfunding, theyre not core tenets of general solicitation efforts. Both fields fall in the family of online fundraising, but crowdfunding and general solicitation are more like cousins than siblings.
Why is this so? The 506 regulation is not a transformative, disruptive change to private finance. Its an evolution of the traditional capital-formation process. That process was built on relationships, personal introductions and face-to-face meetings — not hype.
Ultimately, when aspects of people’s lives move online, things change but not everything. People apply for jobs online, but employers still check references before bringing hires aboard. Individuals manage their finances online but only with institutions that are trusted. Consumers seek potential mates online but get to know them before committing. Many of the old rules still apply.
Private investors — then and now — invest largely according to what they see in an entrepreneur. A successful appeal is one made to the values that drive investment decisions, and all this relates to the entrepreneur seeking funding, who he or she is, what this individual has accomplished and what he or she is building. Here is a sampling of this kind of thinking and the related questions that an investor might ask:
Track record: “What is your experience in this market? What are your successes? Your failures?
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