The Personal Investor builds his investment house or someone´s pyramid
- Dobromir Risov
- 11 minutes ago
- 5 min read
Mag. Dobromir Risov, BSc., August 2026
Introduction
Personal investors face many propositions to invest. Many lack the ability to assess those criticially before deciding. A chaotic mix of feelings, semi schience and future prospects is often plays a big part in the final decision. With negative consequences later. I present three examples to invest to offer a simple framework to work with.
Main
An important pre disposition or say a quality for successful investing is not insider knowledge or investment knowledge as many probably think. It is also not being highly or above average intelligent to find some "hack".
Rather it is a mindset, a psychological frame or call it a "hard in the head". It leads to not believing easily what you are told. This characteristic is more important than anything else. And a personal investor who has background knowledge in finance and accounting does not condition the mindset I talk about here. That same person can be a quick believer of promises. When you don´t have above mindset, it is more likely a personal investor goes for a “one shot does it all” investment. When you are a quick believer, when you know the framework it allows you to control a bit your decision making.
What does it look like, a one shot does it all investment? Three examples come next:
Bitcoin - not a currency, not an investment, mysterious and new
Bitcoin had and still has that element of something new. Uncontrolled by governments. And, there is the mystique of who invented Bitcoin. There are rumours about the inventor but they are not verified. If you want to know more about it I dedicated a series of blogs on Bitcoin (An Introduction for the Personal Investor to Cryptocurrency - part 1).
A closer look at Bitcoin, reveals to the personal investor, Bitcoin does not qualify as a currency, albeit Bitcoin calls itself a currency. Also, I advise the personal investor to watch out, as it is considered and called frequently an investment. Yet, Bitcoin does not meet standard investing criteria. It does not generate any profit, any income. More on this in the blogs (A Review on Cryptocurrency as an Investment - part 2 ). And yet, when a personal investor takes a look at the historical charts of Bitcoin, the hopes for future gains similar to the historical ones come up. Belief kicks in and overrides the facts. And I don´t know how Bitcoin´s future price will be - the price could also go to USD 200.000. This is about differentiating hopes from facts and not assuming the ability to forecast the future.
Space X stock - next year will be different, hopefully
Space X is a company run by the famous Elon Musk. One of the richest men in the world, Musk owns and runs Tesla and Twitter. Maybe there is some piece of media “news” once a week from him or about him.
Next, I remove the charismatic business leader from the investment picture of Space X. I want to look at the financial and investment fundamentals of Space X. What do I see? I see a lot of losses for many years. I wrote in this blog (The Personal Investor: The components of business and speculation in the stock markets - a case study) in detail about Space X. Lacking business profits, the company manages to go public. Since then the stock price has dropped by 50% from a very high level. When you as an investor rely entirely on the future for profits to happen, that have not happened in the past, I would not invest. As often positive forecasts are placed to warrant those hopes, I advise to read the blog on the accuracy of forecasts Forecasting Markets & Stocks. In this blog you get a realistic view on hopes and expectations in the financial markets.
Amazon stock - hopefully tomorrow will be the same as today
When a personal investor looks at the 3 year chart of Amazon, he is already interested. Well, I would be. When the personal investor looks at the chart “all” (since the company went public as below), the past investment picture is fantastic and real at the same time.
And this is plausible as the company has been very successfull as a business. Likely, the personal investor knows the company as a client. Amazon has a unique market dominance. And, Amazon, is also run by the notorious Jeff Bezos. A personal investor will notice on the minus side the high valuation of the stock. That means for him that the profitability I had just mentioned is priced in in the stock price. Given that in mind, the investment picture deteriorates. The personal investor faces a profitable investment which comes expensive. The question to be asked is: how probable does the personal investor think is it that the stock price of the last three years is going to develop as positively during the next three years? Going in more detail on this topic is beyond the scope of this blog. However, when the answer to a problem is: a business leader will guarantee it, watch out as a personal investor. No business leader has Superman powers. While personal investors who bought Amazon stock 10 years ago, have gotten wealthy today, this does not mean you will become the same when you invest in Amazon stock today and hold it for 10 years.
Summary & Conclusion
I presented three case studies on different investment opportunities for the personal investor. While all three differ materially I also showed they have some thing in common: there is some mystery about all three of them. A new product or idea or a fascinating business leader. While they can be capable as entrepreneurs or managers that capacity does not guarantee investment success on its own. That reliance on the capacities of one person leads to beliefs. That said leads me to the second topic raised - to critically look at the fundamentals of every investment in particular when there is some mystery around that investment. Even with a company excellently run and profitable like Amazon can pose problems for the personal investor.
Since investment opportunities change, how can a personal investor apply the presented knowledge on other investments beyond those three cases here? I advise to set up two "camps". In "camp 1" the personal investor puts factors like: enigmatic business leader, new venture and statements of the sort “a bright future”. In "camp 2" I would put the factors of: has the business been profitable in the past, how expensive is it for me to buy the profits (own the stock), does the investment meet standard criteria of what an investment is. After setting up those camps, the personal investor takes time to process the information. Then takes a decision. Investing soundly stays the same regardless of the personal investor´s resources. The difficulty is in following those principles, not understanding them.
Frequently Asked Questions (FAQs)
1. How do personal investors assess new investments? They need to focus on the business and investment fundamentals instead on believing the mysterious.
2. What risks await the personal investor? Assuming that a stock will continue to rise in the future in the same way as the stock has performed in the past.
3. How does a personal investor protect himself from false assumptions on stock performance? By critically assessing the company and the investment ratios before buying the stock. Doing so adds relevant information than merely deciding based on "news" , "feelings" and stock market charts.
4. Does buying single stocks make sense for a personal investor? It does not because the analysis takes too much time. Time, a personal investor does not have. Investing in a basket of ETFs is preferable to the personal investor.
Sources
Influenced by “the Intelligent Investor” by Ben Graham and Commentary by Jason Zweig
Barrons – https://www.barrons.com for data, and company info.
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