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Finding the best investment opportunities depends on several factors: goals, time frame, and risk profile. All these factors have impact on how you select the investment vehicle that suits your needs best. Take the time to think about these items before developing your investment strategy.
An investment opportunity can be both a publicly traded and a privately held company. Investing in a publicly traded company requires the purchase of stocks or shares issued by the company. Investing in a private company requires a negotiated contract with the company shareholders. This contract provides the terms of the agreement, the amount of the investment and the rights of the investor.
The purpose of an investment is to provide the company with cash flow to fund their operations and to provide the investor opportunities to earn money. Investing in a publicly traded company is a very common vehicle for wealth growth, as it provides access to a broad range of companies across many industries. Procedures and laws are in place to provide a minimal degree of assurance to investors of the legitimacy of the companies.
Your goals are the first criteria to consider when looking for investment opportunities. Write down the amount of risk capital you are looking to invest and determine your desired rate of return. Remember that the greater the return, the higher the risk. Review historical data to check if your goals are realistic.
The time frame is critical to identifying investment opportunities. A short time frame requires more aggressive investment opportunities to receive a good rate of return. The longer the time frame, the greater the chance of obtaining a higher rate of return. The more aggressive the strategy, the higher the risk, as well as the potential rewards.
The risk with investment is the potential to lose your capital, or all the money that you used to purchase shares or stocks. There are different ways to mitigate this risk, but all require a certain degree of effort on your part. Diversify your investment portfolio by purchasing stocks across a range of industries.
Learn about the companies that you are investing in. Read about the services they offer, market share, competitors, major suppliers, locations, past performance and senior management strategy. Attend shareholder meetings, analyze the reports, and ask questions. If you select private firms to invest in, schedule quarterly meetings to review the financial statements, discuss management decisions and hold them accountable. There are broad ranges of small to medium size companies that can provide a great return on investment to private investors, but they require active management.