Investing is a serious deal... BELIEVE IT! You can either gain profit or lose it... We all know what you prefer! #WINNING... Knowing why, how and when to invest in a business is very crucial, especially if you’re investing a lot of MONEY. Investing may seem easy for some, but there are people who are dedicated to doing research and investing large amounts.
There are many reasons investors choose to invest in a business. The main reason is to make a profit. This is generally done by waiting for the value of their investments to grow and increase. There are many ways businesses and people invest into other businesses. The most common way to invest in a business these days is to buy stock and shares, which represents a portion of ownership in the company. When investing – buying a stock or share; ‘you are becoming an owner of the company that stock represents’.
Are You Willing To Do It?
Investing in a business can sometimes come with big responsibilities and integrity. You have to be able to have trust in the business you are investing in. If you are having doubts you could potentially lose money. Think about it... If you decide to put money into a business that you have doubts about, you will probably regret it and question yourself over and over again.
What does the term investing mean to you? Doing appropriate research is generally the major key to success when deciding to invest. You need to know when the best time to invest is, where to invest and how to do it. By knowing these answers, you should have no problem in making profits.
3 Key Things To Look At In A Business You Want To Invest In...
- The Businesses CEO – when looking at the CEO of the business you are actually looking for a brief overview of their business background and whether or not the business will still thrive once they leave.
- The Business Model – this is crucial as you will need to know the way the business is run to see the potential it can grow. The business model is a business strategy.
- Revenue, Net Income And Profit Margin – By checking all these stats you are able to make estimations or forecasts for the future.
When investing, you are generally told not to invest all your money in the same business or business area and I AGREE! ‘Don’t Put All Your Eggs In One Basket’. An example is Woolworths Group... Everyone remembers them don’t they, High-street GIANTS? What do you think happened to them and all their shareholders? In 2008 trading of shares were suspended as they entered administration resulting in over 800 stores being closed and over 27,000 jobs being lost. By Woolworths going into administration all those invested in it would lose their shares and money and end up with nothing.
By diversifying - you can put money into several different types of investments to spread out your risk and at the same time, improve your chances of earning profits. The percentage of gaining a profit rather than a loss could be closer than you think; again, it’s to do with what research you do!
Diversification can be a risk and a blessing. Imagine you separate your savings into 2 piles of £50,000 and you invest them into 2 different businesses. If one of the businesses fails and the other succeeds, you will potentially still come out with more than you put into for the successful business or at lowest, breakeven. This isn’t a LOSS! Whereas the other £50,000 has been lost due to the fact that the business you invested in didn’t do well. Atleast is wasn’t the whole £100,000 that you could have gambled if you didn’t diversify and split in and decide to invest equally into two different businesses... How would you have felt if you decided to invest all your money into the losing business?
Investing a sum of money into up and developing businesses is usually a good idea, especially if you know they have the potential to grow. By buying shares and investing in these up and coming businesses it gives them a chance to use the money and achieve goals quicker allowing for a better and more efficient time period of making profits.
Some simple smart tips to keep in mind for when you decide to invest...
Be Patient – Never rush into anything, especially big decisions like investing money, doesn’t matter how much. By being patient, you can keep an eye on the prize. ‘Investing is a marathon, not a sprint’. This is so true!
- NEVER Invest Into Something You Don’t Fully Understand - If you can’t clearly explain what you are investing your money in to someone then it’s a sign you shouldn’t invest at all.
- Try To Avoid Individual Stocks – the reason you should try and avoid single/ individual stocks is because it’s very easy to get caught up in the moment. The risk is higher than normal as your putting all your money into one stake. If that business losses money, it means you’re losing money!
- KISS Your Invest – You do know I don’t mean to actually kiss the money your investing lol. KISS is an acronym that stands for Keep It Simple Stupid. Keeping your investments as simple as possible is the best way to know and make sure you know where your money is going.
- Always Watch The Fees! : Make sure you look out for all the hidden fees. Some will be shown up from but those that you can’t see are the worst. We’ve all seen it happen before, where you’re charged for something you’ve been unaware about. An example of a fee that you have to pay may include a transactional fee where they take a little percentage off, and some bigger fees include Annual fees where they can take up to 6% of your investment money.
Dr Jason Cabler, a practicing dentist stated some of the above tips in one of his articles. He created a list of some of the tips you should consider when looking to invest. Looking closely at the article I realised that they would be good to include as I feel they are important. Included with the tips are some examples to help understand better. In my opinion, these are the easiest to execute and remember, especially for first timers. Do you agree with this?
Finally, a few more questions to get your brain ticking - have you invested before? Would you like to? Are you willing to take a risk? To be fair, you may have thought of these questions already, and that’s a good thing! So we know, to invest is to put money into something, maybe a service or the production of a product – it’s all business. One thing you need to make sure you do, and it’s been mentioned many times by everyone - You need to make sure you have researched the company you want to invest in and the market trends for that businesses sector. If there’s a decrease in the sector are you really going to try and invest there? We all love making money don’t we? Investing is a hard game to play, especially when you haven’t done it before. Always remember that research is the key. Once you have the key, you can unlock the door to success!