What factors do investors consider when looking at an investment opportunity?
July 15th, 2010
I’m sure they look at the return on thier investment and the possible profits. How heavy do they weigh the "person" asking for the investment?
Would it be challenging to find an investor to open a second hand store? Does the persons credit matter?
I’m talking about my bad credit.
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these are some important factors that an investor must consider while investing:
About his income…how much he gets in hand, what are his requirements(basic requirements like..living family etc) and other commitments he has.
How much amount can he invest after meeting all his requirements in a month.
how much risk can he take while investing…..this is very important coz Risk is Directly Proportional to the returns…..More risk More Returns..Vice a versa.
What kind of returns that he wants? does he want a periodical return like say every month or yearly or long term like say 5 years…
After thinking about this…he has to think about which avenue to invest in( stocks,Mutual funds,Commodities ,real estate, Gold etc) this actually depends on all the above factors…and the amount he is gonna invest is predominant….
well each of the investment has got different levels of risk involved…and he takes a decision regarding his level of taking that risk…
the persons credit does not involve in the investment scenario(coz only if he has enough money he will invest…)
The "person" you’re talking about is referred to as Risk.
Most investors look at what the possible rate of return will be and the likelihood that they’ll see their money again and/or a profit.
They should weigh it a lot. Put it this way, if you and Bill Gates were asking for a loan, most people would feel Bill Gates would be a less risky person to loan to. If, to them, it looks like your business ventures won’t be successful and you don’t make enough money to eventually pay them back, then it’s doubtful they’d give you a loan.
I don’t really know your business plan, so I can’t say how successful your idea will be. But when you refer to "the person’s credit" are you referring to the investor? Or the investee?
How much?
How fast?
What’s the downside (the worst case scenario)?
They will look at the risk that the person will scam them, that the person will manage it poorly, that the market cannot support it, and then weigh those risks with the anticipated return on investment. So the person’s credit and criminal history will be the first things they look at. If you have bad credit and have never owned or managed a store, I doubt anybody will consider you. If your credit is bad, but you have management experience, they may be interested enough to take the next step and request a business plan that includes a budget with expected volume, salaries, rent, advertising, list of strategic ideas such as how to advertise, how to acquire the stuff, what to name the business, and where is the desired location, and a summary of the pros and cons of opening that business, such as where are the closest competitors, what is the total population in that town, and is their a desirable location near a large community of lower income families, such as apartments, older homes, and trailer parks?