The machinery.
If you could isolate one important similarity about all mechanical and electronic gadgets it would be that they are built to work. In fact if they don't work their utility is reduced to zero value. The lawn mower that never starts is referred to as a "hunk of junk" We are pointing out (with some irritation) that the object that is supposed to have a certain utility is devoid of that utility. It's a worthless pile of metal now in fact it's a liability taking up space in our garage. Any mechanical or electronic gadget or contraption that has no utility (it doesn't work) therefore loses its identity as a gadget.
The net result of Opportunity Investment is a compounded profit. There are several tools we use when we exploit Opportunity Investment to achieve a result. Our goal is not a single profit. One transaction, a fortune, does not make.
We have an over all plan for the next month the next year the next 5 years. Compounding.
The first technology any Opportunity Investment entrepreneur will visit is compounding. However some don't get passed it. It's a dangerous tool and you can get hurt playing with compounding.
 
Since the invention and mass production of the humble calculator more people have been hurt and hung up by compounding then at any time in history. (Obviously when we express "hurt" we mean set- back in our goals and aspirations) Nevertheless compounding is a fundamental technology every single Opportunity Investor utilizes. Its used not only over long term projections compounding is used to micro manage projects on a day to day basis.
 
The first place one typically starts when using the compounding tool is at the ultra conservative end. We calculate how much money we will have at retirement if we deposit $40 per week in the bank, compounded at 7% annually over thirty years. You can work it out for your self if you are inclined by simply multiplying 40x52x1.05 and do the calculation 30 times on the last result. However upon completing these calculations immediately we realize we may be too old to enjoy the money if we had to wait that long. We also note with some trepidation that over 30 years, inflation would travel at about 3-4% with us, so the purchasing power of that fund would not be too impressive. Take into account tax on interest and bank fees and the result, although initially exciting, is now not so good. This is where it gets dangerous.
Casually amusing ourselves with our calculator, we suddenly get an idea. What if we could find a way in the real world to get a higher interest rate? You get a twinkle in your eye as you hit the CE button excitedly three times to erase the previous calculations. You start with double the interest rate....14% You feel fairly confident you might be able to find a bank or co-op or some place that might have this amount of compounding on offer so you start again. $40 times 52 etc.

Of course what you do next is obvious, you double the interest rate again. 30% then 40%

 

You don't dare see it as anything but folly but you try the figures 100%, and 500%

 

How long would it take to double the hundred? 1 month, so according to those stats, you could join the million dollar club in just over a year starting with 1 hundred dollars. Its possible. The planning would be huge. Nothing would be left to chance. But that doesn't happen. You are numbers focused and not plan focused. Indeed, commonly no particular strategy comes to mind.

 

What happens next is that you get hung up on the horn of the dilemma.

 

Leverage, the sword of a Titan.
You may have heard of leverage being referred to as a double edged sword. If there was ever a good example of a technology or a tool it would be the sword. It's the ultimate tool for "getting your way".(just behind the pistol anyway) Leverage is simply a term that refers to using OPM or "other peoples money". There are many types of leverage however the context most referred to is the use of money you don't own in exchange for a hiring fee usually paid in the form of an interest rate. The caution many attach to leverage is unfounded. The expression "leverage is a double edged sword"
is really misleading. It represents a mysterious warning at best. What is meant by the expression is that as much as leverage has a capacity to assist you- that same capacity can cut into your progress if your result is a loss instead of a profit. 
Can you see how this can be exciting when you go back to your calculator? The compounding ramifications are staggering (150% annualized is 1800%). Of course there were loan costs and holding costs and taxes. The reason leverage is considered a "double edged sword" is because in our example above if an Opportunity Investment deal went south and you bought $500 worth of value, a move of 10% against you would result in a $50 loss ( and that would translate into a 50% loss of your seed capital- think bigger numbers and you can see their concern) However a 10% move against you with just your $100 spent on the investment object (without leverage) is the same 10% or $10. So the "curse" is that your gains are leveraged but so are your losses.
To illustrate with an example. If you made 24 transactions in 12 months and 3 were losses. You would be a long way ahead with leverage. But if you did those same deals but you had 21 losses then leverage or not you would be behind.
Pyramiding profits.
Money is flat for a reason. When we were young we collected pocket change. It rattled around in the tin money box with delightful clanking noises. The money box felt heavy and the potential for ice creams and lollies was astounding. In this little tin box jingled countless possible trips to the toy store and corner shop. One day the can opener emancipated the coinage and the coinage was gone. What replaced it was match box cars and lolly bags. The decimated money box sat quietly on the shelf broken, opened and abandoned. We learn very early that we don't want the coin we want the items the coin represents. We want true value. A bit of round steel with some writing on it is not the object of our desires. A paper note cant be eaten or lived in or slept on. A paper note is made to be stacked. They are so thin they can be stacked to bewildering numbers without taking up much space at all. Delayed Gratification.
 Without the capacity to delay gratification as an individual, you face returning to square one continually. Its practically impossible for a spend thrift to advance to a point where the working capital is finally plentiful enough to supply a living on top of profits. Its similar to trying to light a camp fire without matches. The kindling has to be so fine and so dry the conditions need to be just right and the nature of the endeavor is so very precarious until you see smoke, then a flame begins to lick, but if you let your guard down at that point, 9 times out of 10 you will be back at square one, and the fire will fail. Its not until a branch of decent thickness is alight that we can ad more "pressure" to the camp fire and be confident that the flames wont go out and then finally the larger logs are piled on for longevity. This analogy serves to illustrate the same precarious circumstances you are in before the compounding has had a chance to work in conjunction with leverage. Without the commitment to delay gratification for a definite specific period of time the slow tedious work in the beginning will all be for naught.
Stacking your cash or pyramiding your profits is another form of focus to task. The splurges you may casually be used to will not be available until you are out of the woods. That's why we advocate strict segregation methods for your funds. Dipping in can be a big mistake and cost you years in terms of set backs. Bottom line for compounding and leverage to be effective ALL the profits must be re-invested into your next deal. The three cog mechanism of Opportunity Investment. The three tools we present above are inter linking. They work, each relying upon the other to form momentum. If you are fortunate enough to be in the Million dollar club then passive income is easy. There is an array of choices out there in the 6-10% range meaning quite a comfortable income. For those that aren't, these three cogs align propel and steer toward that milestone goal.

Utilizing Opportunity Investment for financial progress is simpler with the right tools. When we want to build a deck on the back of our house the tools make the job easy and accurate. So it is with these tools.

Compounding is your compass its an orienteering tool. Without it like trying to find a place without a map, you will simply lose your way.

Leverage is the motorized time reclaiming device. It crams a year of compounding into a week. It is the drive in our momentum machine.

 Copyright. 2005 Opportunity Investor.com

What to Invest in -Part 1
Everyone starts somewhere
Read where you should start
www.opportunity-investor.com/investin1.html