Free Workshop | August 28: Get Better Engagement and Build Trust With Customers Now Like any traditional business venture, inventing involves spending money to make money. Therefore, when contemplating the commercialization (and monetization) of an idea for an invention, think about all opportunities you have to spend your money and then consider whether it makes sense to invest.To make a good decision, have a clear understanding of this fascinating and exciting enterprise. Often, people are extremely passionate about their ideas. Although having passion is a good thing, don’t let it cloud your judgment. I’ve seen many lives disrupted by people going all in on a “sure thing” invention, only to have it not be as successful as they had hoped.To avoid unwanted heartbreak, think about inventing as an investment.Related: Inventing Can Be Fun, and Profitable. Here’s How to Get Started.First of all, investing in an invention is a high-risk, high-reward endeavor. Many factors can be controlled but others not as much — a scenario that can bring your invention plans to a screeching halt. Some factors are hard to detect until it’s too late. A few years ago, I spent a full year developing a sophisticated aquarium filter for a client in a joint venture. Near the end of the project, a larger company with a similar project in the works, purchased the client’s firm. A showdown between our model and theirs was arranged to decide which one would be put into production. I had already ordered the first production samples from the factory, which had been working on the molds for four months. Then the UPS plane carrying my company’s samples burned up on the runway in Atlanta destroying everything. Rather than waiting for more samples, the client chose to cancel my project and wrecked a year’s worth of hard work.Countless other factors can’t be controlled, such as pending patents that you may be unaware of or competitive products just about to hit the market, which can crash your big plans. So no matter how smart you play your cards, be prepared to lose everything when investing in an invention. This potential for total loss raises the risk profile.Related: Eureka — a New Product Idea! Now Ask These 5 Questions.The biggest risk factor for the novice inventor is a lack of knowledge and perspective. To mitigate this risk, form a team or advisory board of experts to help you make decisions wisely.On the flip side, inventing can be a very high-reward investment. When done right, an invention can generate substantial passive income or result in the creation of a new company. I’ve witnessed investments of less than $10,000 turn into annual royalties of more than $100,000, potentially for more than than a decade. The investment is usually complete once the idea is licensed, so the total investment is fixed and yet the money can keep coming in. This can lead to incredible return on investment of as much as 50 times the initial investment over time (much better than the return from traditional stocks or real estate investments).Plus there are numerous intangible benefits to investing in an invention. For example, the initial and imaginative stages of inventing (product designing, creative problem solving, visioneering) are inherently fun to do.Another benefit is that your invention is an exclusive investment opportunity. It’s only available to you (assuming you have an idea worth investing in and the ability to pursue it).This setup gives you, the inventor, unlimited opportunities, governed by your unique abilities, to realize a creation from a truly singular idea that you pursue with your own personal passion.Even if you fail, you’ll know you took a risk and at least tried to bring your ideas to life.Sometimes these benefits make it all to easy to ignore the telltale signs that a particular idea does not represent a good investment opportunity.Should you decide to invest in your idea (or someone else’s), follow these three simple guidelines, which I’ve culled from my personal investment advisor and finance coach, Ruben Rojas:Related: The ‘Aha!’ Moments of Famous Inventors (Infographic)1. The reward must justify the risk. Since inventing is inherently risky, make sure the idea has enough of an upside. Too many people invest heavily in ideas with small potential due to a limited market or difficult-to-navigate industry.2. Never invest more than you can afford to lose. And be prepared to lose it all. Don’t bet the farm on a risky investment. Maybe bet a few acres or a barn but never overextend yourself because despite your confidence, you may bet wrong. If your particular idea is going to cost more than you can spare, either gather other investors or try a simpler idea.3. Be prepared to spend more to make the investment work. Sometimes your first effort doesn’t result in the reaction you’ve hoped for. Evolving the product or adding more value to it can increase your chances at success. If you blow all your cash on the first pass, you’ll have no room to make adjustments later.When inventions work, they can be an extremely lucrative and exciting. There’s nothing quite like the feeling of walking into someone’s house and seeing one of your inventions there or on the shelves of Target or Bed Bath & Beyond.Inventing can make a lot of sense as part of a rational investment strategy if you happen to be someone with bright promising ideas. And as long as you play it smart, the risks can be managed to make the rewards worthwhile. Related: Your One-Stop Guide to Royalty Rates (Infographic) Enroll Now for Free 5 min read August 21, 2014 This hands-on workshop will give you the tools to authentically connect with an increasingly skeptical online audience. Opinions expressed by Entrepreneur contributors are their own.