Recently a friend of mine made a bad investment in internet real estate which ended badly. For him it meant losing about $7000 dollars he never really had. The return on investment would have paid itself off within about 9 months if things went smoothly, and this is what he was counting on, but instead it ate a hole in his pocket book, and caused quite a bit of anxiety and frustration.

Can a lesson be learned? Of course! Don’t invest in something you haven’t done your homework on. This was his first mistake. I told him before dropping any money, to come to me and I would help him if he found a good investment. Unfortunately he didn’t take me up on the offer and instead tells me the following day he threw down about $7k, and asked me what I thought. Sometimes its hard to respond to a friend letting them know they made a bad investment choice. But my response was that I was a little unsure, and what he had put his money into seemed unstable. Several days later his earnings went from $70 per day to about $5 per day.

After thinking over what happened with this deal, I realized that for a lot of people that some simple guidelines for investing in just about anything could be applied which would allow people to decrease the risk factor considerably. Whether you are an old car investor, Mutual Fund investor, stock investor, domain investor, home investor and the list goes on… you can follow these simple guidelines to making better investments.

• Know what exactly your investment is and how it works. Have you done due diligence?

• Look at the track record of your investment. Has it increased in value year after year?What is the potential for further growth?

• Can the investment continue to increase in value or can its ROI improve.

• Are you investing on impulse, or have you actually considered the first 3 things of this list?

• How high is the risk of loss. How valuable would your investment be in a worse case scenario?

You may have your own methods for deciding how to invest, but this is what I have come up with, and I hope it proves helpful to anyone out there that is about to invest in something.

Feel free to comment below, I would like to get your input and thoughts.

For more insights on websites and specifically domain investing Check out this guest post by Joel on Financial Samurai. Since this article is short I’m gonna point you to a nice long one.

Also check out an interesting read on Home investing at Dinks Finance.