Disclaimer for the entire blog: This blog is being written for fun/educational purposes only. Nothing on this blog is investment advice or should be acted on without seeking professional advice.
It appears that the top investment performers are people who do more than just passively invest but actually do things to make companies more valuable/profitable. Carl Icahn is a good example of an active investor who tries to get companies to perform better. Carl’s performance even outshines Warren’s.
How is this applicable to entrepreneurs? Entrepreneurs should re-invest in themselves and their ideas because by having more control, they can often do much better than investing passively.
Further, I think entrepreneurs should split their time on the following:
A) Active investing – Where they are personally involved in managing the operations and
B) Passive investing – Where you invest in low risk, liquid investments (eg. treasury bonds) so that you’re not distracted for #1.
It’s not realistic to be involved in multiple active investments without diminishing returns. Therefore, an entrepreneur should ensure that they carefully select A) and that their B category investments should take minimal time. I think a big mistake people make is that they think real state goes into category B). If you have to personally manage the real estate investment by rehabbing it, or managing tenants, I think it would fall under category B.