1. Understand All Sides of a Deal Before You Make It

In The Princess and the Frog, the princess agrees to pay the frog’s price before she knows what it is. In the context of the story it might seem obviously foolish, but in the investment world it’s not all that uncommon.

For example, investors might not understand the terms of the deals they make. They might be so attracted to the anticipated returns on an opportunity that they might avoid contemplating the risks. “That investment doesn’t have a lot of risk,” they tell themselves. “I’m sure everything’s going to be fine.” Just because you’re not looking at the risk doesn’t mean it doesn’t exist. Just like the precious ball in the well, an investment can very easily be tossed out of your grasp. ...

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