Other people’s money investing, also known as OPM investing, refers to investing using funds from external sources rather than your own savings. It has become an increasingly popular way for people to enter the world of investing and build wealth. In this article, we will explore the basics of OPM investing, including its advantages such as requiring less capital and diversifying your portfolio, as well as risks like loss of control and pressure to deliver returns.
The main advantages of OPM investing
The biggest advantage of OPM investing is that it allows you to invest with less of your own capital. This makes it easier to get started and gives you the ability to diversify into more investments. Additionally, by using other people’s money, you don’t have to liquidate your own assets to free up funds to invest. OPM investing also allows you to leverage other people’s expertise if they are more experienced investors.
The main risks associated with OPM investing
While OPM investing offers advantages, it also comes with risks. The main risk is loss of control – when using other people’s money to invest, they may want a say in investment decisions. There is also pressure to generate high returns for investors, which could lead to excess risk taking. Additionally, extensive regulations around pooling investment funds means there are legal considerations.
In summary, other people’s money investing provides benefits like getting started with less capital and diversifying, but has downsides as well around loss of control and return expectations. Ultimately, the advantages and risks must be weighed carefully when considering OPM investing.