The goal of every investor is to make profit. This is why investors like to ascertain the viability of investment business venture before plunging into it. While some investors refer to their financial advisers before taking any decision, other successful investors have mastered the art of looking for key indicators that give some clue as to the success rate of their proposed investments. This enables them to take calculated risks which separate investors who succeed from those who fail.
After all, life itself is about risk taking. An investor who doesn’t take time to do his research before venturing into an investment could end up disappointed and frustrated. For instance, when the Nigerian stock market was booming in 2008, so many investors, without counting their cost, hastily bought shares of various types. Not long after that, the stock market crashed and a larger percentage of them never made any return on their investment. Out of disappointment, most of these investors started selling off their shares for far less than they bought them. Today, some of those shares have picked up again.
We mentioned earlier how investors can grow their investments by making strategic choices based on information gleaned from key performance indicators. Some of these indicators are:
Any good investment, which will yield returns, can be traceable. What this means is that, based on its past records, you can study the success rate or failure rate of an investment and predict if it will be beneficial to you.
You should be able to measure what the success of such investment will look like. You can have a predetermined end, which is measured from the beginning of such investment. Such investment should be able to tell the amount of input that is required to achieve a particular outcome.
Investments that yield returns are usually steered by a clear and concise business plan. Anyone who is willing to invest can pick it up and get a clear description about such investment. Although the plan could make use of jargons or specialized language, such dark spots can be readily clarified by the relevant professionals and then decisions can be taken.
4. Managed Risk
Though many people are wont to say, “The greater the risk, the higher the returns on investment”, it is pertinent to distinguish between managed risk and foolish risk. Business Dictionary defines managed risk as identified probability of loss, or exposure to a danger, that has been minimised to an acceptable level through careful planning and implementation of effective countermeasures. Risks that are taken based on feelings or instinct rather than careful planning may be considered as foolish risks.
Never venture into an investment that has not been proven in one form or another. This is not to scare you away from investments, but you must have empirical facts to prove the profitability of your proposed line of business. It is easier for an investor to invest in a venture that has been proven, than trying to establish an untested path.