What is an investment opportunity?
While you are looking for an investment opportunity, it is something you put your money into in order to get high returns in the near future. There are different Business investment opportunities which differ from investment prospects after considering the future risk and uncertainty element. The real aspect of making the right investment discussions is considering all the aspect related to time returns and the best opportunity available to you. Fixed deposit is one of the best investment return process.
Analyzing the risk component
Your investment would only give you good returns in case you are responsible enough to analyze the risk component associated with the investment you are about to venture into. One should always be calculative enough while estimating the risk component. Investment’s likelihood to change its value as it is volatile; this is what many economists claim.
To make you understand better let us consider the stock market as an investment. Stocks are highly fluctuating in nature as new products, and financial reports can affect them considerably due to companies’ financial position, growth evaluation and future plans are taken into consideration in the market report which makes an investor decide to buy the shares of the company or not. Thus, it’s a risky investment with price frequently fluctuating.
As the saying goes, the higher the risk, the higher is the profit. Thus, the Government bonds are the least risk involving investment and hence with least volatility offering a limited risk with no such great returns. The risk factor is least and therefore having predictable fluctuations making it a safer investment with minimum returns. Thus, risk factor plays a major role in determining the investment opportunity offering you the highest returns.
How does Investor’s psychology play a role in taking the investment decision?
An investor’s psychology often plays an essential role while analyzing an Investment opportunity. There may be a large disconnect between how appealing a given investment opportunity appears and how likely it actually is to make money for those who take advantage of it.
The economic crisis of 2008 and 2009 is a great example when there was immediate dip in the housing industry which back in the era of late 90’s seemed to be the best possible investment opportunity due to boom in housing prices for many buyers and lender which later went to a great low leading to unrealistic prices and unaffordable loans causing a major dip in the economic growth of the country.
Stock prices are set ultimately according to the buyer’s capacity and willingness to pay for shares, and the shareholder’s willingness to accept the same. Fear of the share market going down for a particular company may encourage the shareholders to sell the shares at a lower value, which will lead to a drop in the share price and a fantastic investment opportunity for new investors who can enter the market at the new low price.
Analyzing the needs of Investors
The value of an investment opportunity varies from investor to investor. Big Investors can invest their money in the opportunity that offers them high returns because the risk involved in it is greater and they can bear it whereas small investors go for the opportunity that divides their risk into multiple investments offering different returns depending on their volatility.
Usually, young investors opt for bigger risks as they have enough time to wait for their investments to gain considerable value. Some investment opportunities that may seem too good to be true often play with the sentiments of the investor and it is actually nothing but a scam to trap money out of genuine buyers and therefore it is crucial to think reasonably and rationally to make the most out of your investment opportunity.