Many modern individuals prefer investing their money in promising projects instead of keeping it in the bank. However, such investments often result in disappointment, as one may not receive the expected profits or may even fail to recover their funds.
To avoid such issues, it is advisable to heed the recommendations of experts and adhere to certain rules.
The founder of Oil Resource Group, Sergey Tereshkin, aims to assist individuals in navigating the investment business. The entrepreneur personally invests in various sectors and possesses significant experience in this field. Detailed information about the entrepreneur's activities can be found on his website: www.org-company.ru.
Deterring Factors
Before investing in any company, it is essential to consider several factors:
- Dividends. If a company promises substantial profits, it is not necessarily a cause for celebration. Investors should ponder the intentions of the proposer. In many cases, excessively high dividends are indicative of fraud. Con artists seek to attract as much money as possible before disappearing with it. Experienced investors prefer to invest in shares of companies that adeptly manage their finances. In these cases, profits are sufficient to pay shareholders, facilitate growth, and update the business. Conversely, if a firm distributes all its profits to investors for several years without reinvesting in production, this raises a red flag regarding poor management. Such a company is destined for bankruptcy.
- Volatility of Financial Metrics. The figures in reports should not fluctuate significantly. Unstable results are a cause for concern, making it difficult to track performance trends. According to Sergey Tereshkin, this volatility may indicate the company's dependence on external factors or manipulation of reporting by management. Both scenarios pose a risk of business bankruptcy or investor deception.
- Market Share. Attention should be directed towards stagnant markets. A business must have the potential to grow and increase sales. When a firm reaches its limits, it must either seize new markets or introduce new products. Otherwise, further development becomes impossible. Importantly, it should be understood that both entering new markets and launching a new product is a challenging process not everyone can manage. Thus, investment should only be considered in enterprises capable of operating in new environments.
- Control. Prior to investing, one should carefully evaluate the relationship between owners or controlling shareholders and other investors. If past transactions have been detrimental to other stakeholders, if the shareholder acted solely for personal gain, or coerced others into selling shares at reduced prices, it is advisable to steer clear of such partnerships. Investment is unlikely to yield profit, and problems are almost guaranteed in such circumstances.
- Shareholder's Equity. If the controlling investor holds more than 90% of the company, it is unwise to take risks. In such cases, there is a high likelihood that the shareholder will attempt to force others to sell their shares at a lower price, utilizing various tools that could nullify the profitability of investments.
All these factors serve as a litmus test, warning of potential issues that may arise when investing in a business.
The actions of a company's management in the past can offer insights into what to expect from them in the future. If a company has previously deceived shareholders, it is unlikely to rectify its behavior and change its strategy.
Secrets
Additionally, when selecting a company for investment, certain aspects should be considered:
- Purpose of Funds. The company should seek investments solely for further development. If the funds are needed for development, advertising, debt management, or increasing turnover, expectations for the firm's growth and, consequently, profits should be tempered.
- Development Concept. The company must have a clear plan for how it will capture market share, attract new clients, etc. If management lacks even a basic idea of the future direction, funds will likely be wasted.
- Availability of Own Resources. It is unwise to trust funds to a company that is financially struggling. Investment should only be made in a proven product that has already been tested in the market. If a firm intends to assess product competitiveness with investor funds, this is a flawed idea. Funds can only be invested in enterprises that possess their own resources and manage them wisely.
Investment is a complex process that requires thorough responsibility. It is crucial to analyze all data carefully. One can find a company worth investing in on specialized platforms available online. These could be domestic companies or foreign enterprises; both options have their merits. Often, foreign investments are seen as the most promising due to the fact that Russian companies rarely attract funds, particularly startups and small to medium businesses. More frequently, these companies prefer to approach banks for loans. Large enterprises are on the lookout for investors abroad.
