In today’s financially complicated world, it can be difficult to discern what a good investment opportunity is and what it isn’t. We need to be cautious, and yet willing to take a certain degree of risk if we want our money to grow significantly. Here are 5 tips for assessing a potential investment opportunity.
1. It’s had strong returns in the past
It’s one of the first things you should look at when deciding whether to invest. However, do keep in mind that the past is not always an indication if the future. This is a common misconception, even amongst the experts. Most people choose investments that have generated strong growth, but they only look at the recent past, assuming this strong momentum will continue, overlooking the factors that drove this growth and whether or not they’re sustainable in the long run.
2. If it sounds too good to be true, it is.
If you’re promised quick returns, this could be a tell-tale sign that it’s not such a good investment. Anyone using this as a selling point is possibly out to make a quick buck at your expense – ultimately he’s in it for himself, not anyone else.
3. Stay away from it if undemanding investors appear
There’s an element of truth in the saying, ‘bad investors drive out the good’. Undemanding investors will show up and buy anything. In turn, it becomes hard for demanding investors to find opportunities that offer the return and risk balance they need, so they’re forced to sit aside and do nothing. It seems easy to make a distinction now, but with a bit of practice and good advice from an agency like My Wealth Solutions, you’ll soon become familiar with the feature of bad and good investors.
4. Is this currently a strong industry?
When it comes to the stock market, the trends are as fast-moving as fashion. Two years ago, it was considered a smart move to purchase shares in commodities and natural resources – gold, oil, coal and the like. Presently, investing in railroads and other major projects seems a lucrative choice. Meanwhile, certain industries have been stock market staples fluctuating both up and down but never staying down for too long – think travel services, financial institutions, brand names like Apple, Dominoes, Coca-Cola and supermarket chains.
5. Everyone needs a roof over their heads
With housing prices going through the roof, properties are in hot demand, and it has become common place to invest here. This is the one area where it’s relatively safe to invest despite its popularity (it doesn’t work as well in other areas). Cost of living has risen dramatically over the years, and job security is no longer guaranteed amongst the general public. It’s for these reasons that those who can afford to, purchase a property solely for renting out and earning that extra income. It’s a just-in-case measure. Buy in newly developed areas, where properties are new, yet cheaper than older properties in established areas. They may be further away to the city or workplace, but most people just need a home, regardless of its location. If you can, this is an option you should consider.
It may seem a complex matter knowing exactly what is a potentially good investment, but if you observe carefully and know the questions to ask, you’ll soon be savvy enough to navigate yourself through the murky waters of investing.
The information provided in this article has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your GPS Wealth Limited (GPS) Adviser before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither GPS nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.