Have an investment strategy when investing in opportunities

Thursday, March 7, 2019 12:42
Posted in category Uncategorized

Business Angel InvestorsWe all know that there is no such thing as a risk free but highly profitable investment. Although I do get emails telling me they exist, I just dump them immediately.

However with the right preparation you can identify and enjoy successful investments, that whilst not risk free are at least “risk understood” and ensure that they are balanced with a commensurate profitability.

The key to this is establishing your personal investment strategy.  That will be your guiding principle when considering any investment and makes investment decisions much easier. Your strategy should include:

1. How much risk you are comfortable with? This will vary depending on your own attitude to risk, but also the amount of “spare” funds you have. You should never put at risk funds needed for living.

Minimum risk may lead you towards bank cash accounts, bonds or blue-chip companies within the stock market, but of course the potential returns will be lower.

Whereas if greater risk options are acceptable, such as new start-ups, younger, faster moving companies and peer-to-peer lending, much higher rewards can be gained.

A balanced portfolio of investments, varying the number of low and higher risk opportunities according to your own preferences, together with spreading the market areas invested into, will give better protection against unforeseen events.

2. What market areas do you enjoy and which do you have some knowledge about? Not only does it make working with those investments more interesting, but knowledge of the industry allows you to understand the risk elements and determine how successful the business is likely to be.

3. How hands-on do you want to be? The stock market has a wide choice of investments, where you can be relatively hands-free apart from watching trends and swapping stocks as required. There are entire books written on investing into the stock market, so do your research and avoid “too good to be true” investment schemes that may be offered.

However if a more active involvement can be considered then investing directly into young businesses that may now be ready for growth, or even start-ups with good potential can provide both greater enjoyment and returns. Company Partners provides this type of opportunity and importantly for an investor doesn’t take a percentage of your investment from the business as many others will do.

Will you want to be an day-today part of the team, or only adding value where appropriate?

4. Be clear about the management style of the team that you will want to work with.  If investing directly in a business, certainly it must have a capable management team but also one that fits your own way of working. Both of these elements are important. It may be that you can add some personal expertise to the team or help it with finding a missing component, but if the founders are not “on your wavelength”, arrogant or most likely wouldn’t listen to advice – simply avoid.

Finally do due-diligence. Investment into a business must only be undertaken after you have ensured that the people, business and facts as stated are correct. Investors should also be prepared to give information about themselves in return, so both parties are informed and comfortable with the partnership.

See also: Identifying successful businesses

 

 

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