Consider all the possible risks, analyze multiple data from previous periods, learn about the tax implications, costs, and fees for effective investment research.
Investment research is required to understand the functions of the stock market and other assets.
Analyzing an investment can be a difficult and painstaking process for most individuals. Although the required data is simple and readily available, it can be hard to study, analyze, and interpret.
Most investors often get puzzled about where even to begin. The answer to your problems would properly be to conduct investment research.
Do proper and effective research about the investment
Before doing any sort of work that requires you to have a prior understanding, you need to do some research. The same thing goes for investment.
When you are going to invest in something, you need prior knowledge about it such as, how much you are willing to invest, what will be the product, what is the value of that product, the amount of profit you want to make.
This is why, before investment, you also need to do some research. There should be an ample amount of qualitative and quantitative research done and it also should be continuous.
There are plenty of financial advisors and investment research firms that provide daily updates about investment trends and on which sectors you should invest in. Firms such as Whitney Tilson’s financial research service is a reputable firm run by Whitney Tilson and a team of analysts.
Consulting experts can be a good idea before investing. But if you are willing to research and analyze by yourself then consider the following:
1. Understand The Future Risks
There are certain risk factors in investment. These risks or uncertainties are bound to cost you money.
So, it is always necessary to understand the related risks before, doing the actual investment.
No matter how big or small you may think the company is, there is always going to be some related risks. Even investing in bitcoin has its fair share of flaws.
Apart from products that are almost guaranteed to bring you a profit, some products have a higher reward but also come with a higher risk.
Many investors do not focus on the latter idea and lose a lot of money in the process. To identify the risk of investment, you must ask the following questions:
- What are the chances of losing your capital?
- What is the amount of capital you could lose?
- Is there any insurance on the investment?
- What is the best and worst-case scenario of the investment?
- What would you do if the company you are investing in loses its business?
- What is the probability of this being a fraud investment?
2. Compare Multiple Sets Of Data
When searching for quantitative data, it is important to look at the data and annual reports of the product or the company you are investing in.
This gives you a good idea of what the success rate of that product or company is and how likely it will bring you a good amount of profit. But, most new investors make a serious mistake here and do not look for data that extends to multiple periods.
They are often reluctant to find that data and be satisfied with data of one or two previous years. Multiple sets of data and historical data are regularly analyzed when large companies make investments. Especially in the case of FDI’s.
The more data you analyze for a particular product or company, the higher your understanding will be.
You will realize when the product will give the most profit and when the product struggles. So, you must look at data for an extended period.
3. Learn About The Total Costs and Fees of the Investment
Some costs are related to all investments. These costs and fees are for mutual funds, investment fees, etc.
Before doing any investment, it is crucial to know about the extra costs that are normally hidden. Without knowing about these extra costs, which by the way are not shown upfront you might end up paying more than you thought you would.
And as you understand more about these extra costs and fees, you also must take into consideration what you will get in return for these added costs.
Because if there is no benefit in these extra costs, there is no point in investment and will likely scam you.
4. Tax Implications Need To Be Considered
It is not always about how much money you can make from an investment. What matters is how much you can keep for yourself after the deal.
For instance, let us assume that there are two projects to invest in. One gives you a return of 8 percent and another gives you 10 percent. Normally, you will be intrigued to invest in the 10 percent project just because it gives a higher reward.
But you also have to consider tax implications. What if after-tax cuts the 8 percent return becomes 7 percent whereas the 10 percent return goes down to only 6 percent.
Tax implications vary for different reasons like the size of the project, total investment, and related companies. To maximize your return you need to consider the outcome after tax.
5. Learn About The Investment Offering Firm.
To know the value of your investment, you will need to know more about the quality of the company that is offering the investment opportunity.
It is important to get some details about the company. Learn how long they have been in the industry and the business, search for their track records, or if possible contact someone who was connected to this firm.
Now, this in no way indicates that new companies are bad but for making an investment decision, it is always safer to know that the offering company has a successful record and will provide the same benefit for you.
Final thoughts: Tips for effective investment research
The more you research, the better your chances will be at making the right decision. The above-mentioned investment research tips are the five basics that you should always consider no matter where you want to invest in.
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I am Adeyemi Adetilewa, a media consultant, entrepreneur, husband, and father. Founder and Editor-In-Chief of Ideas Plus Business Magazine, online business resources for entrepreneurs. I help brands share unique and impactful stories through the use of public relations, advertising, and online marketing. My work has been featured on the Huffington Post, Thrive Global, Addicted2Success, Hackernoon, The Good Men Project, and other publications.