As I transitioned from under my parent’s wing to my own freedom many decades ago, there was one simple money management piece of advice I wished someone provided to me.
Never shop when you’re hungry. Nay. Starving.
Hungry you can likely satisfy by popping a few grapes in your mouth. Be sure to tell the cashier though because avoiding shoplifting is good advice my parents did instill with me. But when your appetite doesn’t match the task at hand, mistakes will find you.
I’ll give you an example. We were having a handful of friends over to swim and grill. I completed prep work for a couple racks of ribs, a few pounds of hamburgers, and some appetizers. A couple pounds of hot dogs sat waiting in the fridge, but when the number of folks attending increased by three teenagers, I panicked. Have you seen three teenage boys eat?
We needed more.
I grabbed my teenage son and headed to Whole Foods. In all the prep work in the morning and early afternoon, I neglected to eat. We rolled into the store, heading directly to the meat counter.
Everything looked great. I wanted it all, but there was a line. Waiting only made me hungrier. Drool escaped the corner of my mouth. Finally, I heard the magic question.
“Can I help you?”
Within seconds, I chirped out requests for three pounds of wings, some of these chicken kabobs, a pound of the habanero lime thick cut bacon, and four slabs of short ribs. Let’s ignore the fact I didn’t have the necessary time to properly prepare the short ribs.
I walked out of the store with eight pounds of meat. And I wanted to eat some of everything immediately. Because I was so darn hungry.
Long story short, we had way too much food. My appetite didn’t match my needs.
What does this have to do with private market opportunities and private offering in public equities? Nothing directly but everything theoretically.
These potential opportunities require a high appetite for risk, maybe the highest.
They also require a high level of patience. If you’re hungry for quick profits, fast liquidity, or a constant stream of news, then you’re shopping in the wrong place. If you want safety and security, then you’ll want to find another location to shop your hard-earned dollars.
The key to buying any investment is understanding your own appetite before you commit. Understand, truly understand, your risk tolerance. Can you lose it all and not have it change your life? The answer needs to be yes. That doesn’t mean you have to enjoy losing money but you need to realize it is a possibility.
Patience, along with risk tolerance, is a must. Like short ribs, private opportunities require proper time to reach completion.
And remember, you probably can’t buy everything. No matter how great the spread looks, you will need to match opportunities with what resonates with your portfolio, risk tolerance, goals, time frame, and understanding.