Investments are a key driver of finance. It is how businesses grow, and how financially active individuals multiply their cash base; but, it is not for everyone. However, I say this cautiously; bearing in mind that while you need a lot of business acumen and alertness to invest successfully, it doesn’t preclude you from falling prey to investment scams. The point and lesson in all of this, therefore, is: when it comes to investments, you must forget where you are coming from (your university, elite background and what-not) but remember where you are going to, and prepare as if your whole life depended on it, because maybe it does.
Investment, in simple terms, implies sowing money (the way you sow a seed) into a business idea, business outfit or other form of asset with the aim of obtaining a profit or return, which can be one-off or continuous, in the future. Investments can take the form of starting a personal business, buying government bonds, buying company shares, or buying a stake in someone else’s business or business idea. Whichever one it is that you choose, it is important to carry out a lot of research to ensure that the investment is the right one for you, in light of your capital, your business goals and the goals and potential of the business you intend to invest in.
While all good investments involve an atom of risk, buying a stake in someone else business or business idea carries the most risk. That is why this article attempts to share some tips on how you may verify such investment opportunities:
- Verify the source of the investment opportunity:
Sometimes, the tip is in the source of your information. Where did you see it? On the wall of some uncompleted building on your way to work, in the newspaper, on the internet, or did you hear it from a gambling friend? The source of your information, in most cases, would give you a good enough idea on whether it is wise to pursue an investment opportunity or not.
- Do a lot of research:
There are uncountable investment opportunities popping up on a daily basis, so you want to not just research to source for your pool of opportunities but also research to know the people offering the investment, what the investment proposition is, how they make or intend to make their profit, the industry and regulators of the investment opportunity and so on. If there is no clear-cut answer to a question as basic as what does the business do? It is okay to move on to the next one.
- Consider the level of accessibility to key information:
Know what you need to know, and find out. Where you discover that key information is being withheld or is not made available for assessment, seek counsel if you can or seek other opportunities.
- Sit back and reflect:
After you have done your research and compiled as much information as you need to, draw up patterns and make deductions. Ask questions and proffer answers. How is the business expected to grow, and by how much? Is the growth pattern reasonable? How much return is promised and how often? Is the pay pattern achievable? Is the business sustainable? Be a Doubting Thomas if you must, if it is too good to be true, it probably is too good to be true, so you may want to move on!
- Understand the business and/or industry:
Understanding the business allows you assess the assumptions and assertions on which the investment is based with an informed eye. You are better able to justify or question the patterns of growth and return, correlate the risk involved with the expected return as well as compare the potential investment opportunity with other similar ones in the industry.
- Seek counsel:
Importantly, don’t do it alone. No, you don’t jump into investments the way you jump into conclusions. If you have lose money to invest in, you might as well spare a portion of that loose change to obtain good counsel on how best to invest your money.