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In this series we have established two critical points. The first is that there are truly fortunes to be made during severe financial downturns. The second is that most small investors get taken for a ride and end up losing much of their capital.

What is a small investor to do? As we established in part 2 of this series there are two universal investment principles. Simply put they are knowledge and control.

I list knowledge first for a reason. It comes first, it is the primary. I know that we all want to get rich quick, but in the real world this only happens based on luck and you cannot count on luck. You must be willing to put in the time and the effort to become significantly knowledgeable on your chosen subject. This means constantly growing your knowledge base over a period of years. Not a few quick searches on the Internet.

The second is control, for your chosen investment to be an investment and not a crap shoot; you must have some significant control. This has to be more than the control that we have over a stock market investment. Where we can only control the decision to buy or sell stock. We must be able to materially affect the success or failure of our chosen venture through our knowledge base. This way as our knowledge base grows the success probability of the venture increases.

The question becomes, what types of ventures are suitable for a small investor? There are many possibilities. What are your interests? What are your hobbies? What do you care about? What do you have special knowledge of? You may have hobbies that could turn into investments.

Many small businesses need expertise and would be willing to give up some ownership in return for your expertise. Perhaps you are an accountant. You can guide someone as a CFO might, in return for an ownership stake in the business. Perhaps you are a successful restaurant manager, and you know of a restaurant with a great idea but in need of some help. In both of these cases, part of your investment could simply be your expertise. Perhaps you are a retired contractor and you know a young contractor that needs management help and a bit of a cash infusion. Opportunities like these can be wonderfully profitable if you have the expertise.

Another great investment for a small investor is real estate. A small first time investor can get their feet wet in a limited partnership. This is an American legal term for a limited liability partnership. There is a managing general partner and one or more limited partners. Perhaps, you and a friend or two find someone who has experience in successfully buying and selling houses for a profit. If you approach this person with the idea of helping him fund his next project, you can gain the value of his expertise and learn a lot in just a very few transactions.

In part 4, we will look in more depth at Real Estate vs. the other investments that make sense for the small investor.

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