At one point or the other, every man or woman who is serious about making financial progress thinks of investment possibilities and the factors to consider before investing. It is one of the most important things a person can actually do with their money. Now more than ever, we have lots of people thinking of and even making investments in different areas of the economy. The truth is, for most people, the money required to make an investment is not the problem. The real problem is deciding what to invest in. Naturally, the more money you have to invest, the more careful you may want to be about what you invest in. We can also say the value of the money to you would determine how careful you will be when it comes to making an investment decision. $100 may be a lot of money to one person and he or she may have to take a very long time deciding what to invest in, especially when the investment options are not very clear or the person id not sure what considerations to make before investing the money.
No matter the amount of money in question, it is important to carefully consider your options before making an investment. Any amount of money worth investing is a potentially larger sum. Now here are a few things you should consider to help you make th right investment decision and ensure that you get your money multiplied instead of loosing it all together.
Capital needed
Some investment opportunities or options are very promising but sometimes the capital required to start is what you may not be able to afford. It does not matter how much you think you could get from making a particular investment. If you do not have the capital required, you will hardly be able to make it through. Considering capital availability is a vital part of deciding amongst things to invest in and the process of investment decision making. Proper investment of money is not just about having capital but making the right choices.
In addition, the capital initially needed to make an investment may just be an indication of what you will have to put in from time to time. It is one of the factors to consider before investing. Some investment decisions require that you make just a single payment. This is possible in cases where a business is owned by some other person and it allows investors. This will require that you consider what will be required of you, not just initially but subsequently. You may have the initial amount of money required for the investment but if you are not very sure you can hold up with subsequent investment demands, it is better you avoid it. Bottom line is you have to make sure you are able to put in the capital required to make the investment.
You could consider taking a loan as an option in case you are interested in a particular investment opportunity but do not have the capital required. Taking a loan to invest may seem like a plausible thing to do, especially if the investment opportunity seems promising enough. However, it is very dangerous waters to walk in. There is never a hundred percent chance that the investment choice will succeed. It is simply not sound to make any investment decision that involves taking a loan. If you don’t have the capital required to make the investment, then maybe you are not prepared for the responsibilities it may demand or to handle the shock if it fails. Just make sure you are financially ready to make the investment.
Consider alternatives
There are always alternatives, especially when it comes to investment decision making and things to invest in. Ask yourself if there is a better option. Something that will suit your available funds better. When it comes to considering alternatives, there are a few things you should look out for. Ask yourself the hard questions surrounding every investment option you have and answer each question as honestly as possible. Never let the excitement or promises an investment opportunity presents make you rush into making an uninformed or unexamined choice. Remember there are always options to consider and the more you consider, the better the chances of making the right decision. You may not have enough money to reinvest if the first choice fails so you cannot gamble with the money you have. Proper investment of money is a function of careful consideration of your alternatives to ensure that you are making the best choice possible.
Evaluate the risk involved and your level of risk tolerance
There is always a risk involved, no matter the investment choice you make. Sometimes, the risks are as high as those of the stock exchange market. At other times the risks are very minimal, almost unnoticeable. It may not be easy for you to know the amount of risk involved in making a particular investment decision. So it is best to talk to a financial expert. In the process of investment decision making, you have to carefully evaluate the risk involved in order to ensure that things work out fine. No matter your level of accuracy in considering things to invest in, you need to consider the risks involved. One cannot really consider that they are making proper investment of money until all the risks are carefully taking into consideration and weighed.
Carrying out background search to the investment decisions you are about to make may help you evaluate the risk involved. Check how well others are doing in the same domain and the possibilities of succeeding. Also ask yourself how much is at stake in case the investment does not work out as planned. These questions will prepare you to answer the next one which is the issue of risk tolerance.
The issue of investment is not something you should joke with. There are people who have crumbled in life and never recovered because of the loses incurred from unevaluated risks. Besides the fact that your finances may become a wreck, poor investment decisions that lead to huge loses may actually lead to serious health complication depending on how much is involved and the value of the money to you.
Only invest in opportunities which demand a sum you are comfortable loosing.
Be reminded that the issue of being comfortable loosing a particular sum of money is relative to the proportion of your total income or savings we are talking about and its worth to you. If you must invest, let it preferably be an amount of money you are very comfortable loosing. If you cannot stand loosing the money you are thinking of investing, then you have to make a different choice with regards to investment. This is one of the factors to consider before investing. It will enable you stay out of trouble and reduce the risk of putting your money in the wrong place.
Clearly state out your objectives
There are objectives or purposes for which we make investments and there are several things to invest in. Clearly stating your objectives will help you ensure proper investment of money. One of the things you should consider during investment decision making is the objectives of the business you want to invest in. For the most part, it is usually about making more money. Making profits and increasing your financial potentials is just one the reasons or objectives for making investments. Sometimes, it is not so much about about making profits as it is about making impact and touching the lives of people positively. Many people get into business and make investments so that one way or the other people may be positively touched by their investments. This is the case with most non profit organizations. Now for those who are interested in making investments for impact, the choice of investment should definitely be dependent on which one that makes the most impact in the area you are interested in. Stating out your objectives for making an investment will help you eliminate options and make the right decision. It will also help you stay on track to make the most of your investment decision once you have made one.
How soon will you need the money you are investing?
Some years ago, I made a decision to save a portion of some money I had back them. I considered it was not enough for investment and I was just starting to understand the importance of saving at the time. I decided to save about 90% of the money without considering that I might need the money soon. The summary of the whole story is, I went back to my savings and started taking out money from it and before I knew it, I had nothing as savings anymore.
This is sure not about investment but it is very closely related. Once you make an investment, you kind of loose the money until you begin to have profits come in. You have to consider how long you are willing to go without the money you are investing in order to make the right decision. If you think you may need that money to do some other thing, especially something you will consider more important, you should not invest the money. Once you invest the money, you cannot have it back in an instant. This may push you into borrowing in hopes that you are going to repay when your investment begins to bring in returns. Even if you resist the pressure to borrow, you may find it difficult following certain business and investment principles. Most times when you invest, you must let the business get to a certain level before you can take anything from it. If you are managing the investment by yourself, it is possible to just bypass some of these principles. But if you are making an investment in an already existing business, the terms of investment may not allow you to by pass or ignore some of these financial principles. If you are supposed to receive interests for your investment only after a few months, you will not have the opportunity to get anything from your investment until then.
Knowledge
Knowledge is absolutely vital for proper investment of money. The amount of knowledge you have is one of the factors to consider before investing. It will determine the quality of choice you make as you consider things to invest in. So many people invest in things they do not understand simply because they are excited about the possibilities of making money and increasing wealth. Needless to say, it is a bad decision to invest in things you do not have at least basic information on. If you choose to invest in a product or service, you should be able to ask yourself, how much do I know about this particular thing I am investing in? You may not have to get all the information available on what you are investing in if you are not going to run the investment for yourself. For those who choose to invest in an already existing business, you may simply have to understand the basics of the investment decision you are making. This will be based on the assumption that the managers of the company or business you are investing into already know what has to be done for everything to work out well and for your investments to be profitable.
If however you choose to invest in something you are going to run for yourself, you have to get as much knowledge as possible on what you are investing in. Even when you have made an investment decision, you cannot have absolute guarantee that it is going to work out if you don’t have sufficient information to start and run the investment. It is therefore imperative that you carefully consider how much you know about the investment decision you are about to make. The more you know, the better your decision and the greater the chance that it is going to work out. Having enough information will prove vital when you start working on whatever you choose to invest in.
Skills
This may not be necessary for those who are dormant investors since they do not need to make any effort or participate in any way as far as running the business is concerned. On the contrary, those who decide to invest and run a particular type of business will have to gather all the skills they can get. Skills, you should know is very different from knowledge. Knowledge is information while skills have to do the practice of that knowledge. The better your skills in a particular domain, the greater your chances of prospering in that investment. Your skills sets are one of the factors to consider before investing. They are a necessary part of investment decision making.
In considering how much skills you have to invest in a particular thing, if you realize that you do not have enough, you can take off some time to serve under someone who has already made an investment so that you are prepared to make the most out of your investment when the time comes.
History and records
This also has to do with gathering knowledge about what you are investing in, but more specifically it has to do with finding out how that particular business performed with others. Don’t consider your investments as gambling or the stock exchange market where you can simply make an investment and loose money or make profits. Search for other businesses that have invested in what you are interested in, how they have performed, what mistakes they may have made and the results they had. This will help you make the right decision.
Future of the business
Generally, investors are visionaries. Your ability to perceive the future of a business is one of the factors to consider before investing. They build their capacity to see the future of the business they are investing in. You should be able to foresee where the business will be in some years to come. A business may seem very promising at the time when you are making the investments or when you consider it for the first time. However, it could just be a disaster waiting to happen. So many people have invested in businesses they saw so much prospects in only to watch their money disappear.
If you want to make an investment in an already existing business, you should consider how long it has been existing, their profit margin, the stability of the business and any other background information you may need. These will serve as the foundation upon which you can make concrete decisions. Decisions from which you can expect positive returns in the future. Your choice of what to invest in cannot be based just on what you think about the business or its present state of things at the moment. It has to be based on concrete information and your ability to see beyond the present state of the business.
Demand and the need of the product or service
For those who may be interested in starting something small, especially something that has to do with goods that are very consumable, you need to consider the demand for what you are interested in. lets assume you want to make an investment and start a business that will provide fast food in a certain town. You cannot just make the investment out of your imaginations. You have to carefully consider the need for what you are going to be dealing with. If you are based in a particular city, you cannot decide to make an investment in something that will have little or no demand in the area where the business will be located. Even if you choose to set up a business with its market in a different geographical location, you have to consider the cost of transportation and other complications that will arise from it.
It is generally not advisable to invest in a business that has most of its customers in a different geographical location. Without experience and certain connections, you may not be able succeed in it.
Profits
Profits are what more than 95 percent of investors are interested in. Since profits are what you have over what you put, it is important that you carefully consider how much you are putting in vs how much you are expecting to receive as profits. Usually people make investments and begin to make plans for the profits they look forward to receiving. But if you are not even sure about how much profits you should expect and how soon you should expect it, you cannot make such plans. Again, the amount of profits you are going to receive and the frequency with which you are going to receive it will determine how soon you recover your initial capital and start making profits. For people who are really concerned about recovering their initial capital so they can start making profits, you should choose an investment options that has a fast returns rate and the highest possible profits too. However, be reminded that the higher the profit involved, the more risky the investment option is likely to be.
Readiness to make the commitment
You should consider how ready you are to make a commitment to your investment. If you choose to invest as a dormant partner in some other person’s business, you may not need to worry about this particular point. On the contrary, if you are investing in a business you have to run or manage for yourself, you must be ready to put in all the effort and time necessary or else your money will simply be wasted.
Some people invest in promising businesses but because they did not carefully consider the amount of effort that will be required to make it work, they give up on it along the way and all the money that was used to make the investment is simply wasted.
Make the most out of your investment by wisely deciding what to invest in.