Continuous availability of financial resources, especially cash is key to the survival of every business, including yours. George S. Clason, in his book, “The Richest Man In Babylon” notes that money is plentiful for those who understand the simple laws that govern its acquisition. One such law is what I call the law of safe investment.
As a business, you must open yourself for investment and not any kind of investment but a safe investment. In the lines that follow, I present to you, among others, some five simple but crucial principles for safe investment.
- Decide on your investment objective
There are many reasons why a business may invest. While some invest to increase wealth for their owners, others invest mainly to improve their operational capacity. Knowing your objective will guide the efforts and resources to commit and also where to commit such efforts and resources.
- Make a list of firms to invest with
An investment will always be done in a particular asset and these assets are managed by firms. It is crucial to make a list of firms to invest with and more so investigate to find out how reliable they can be. Seek professional advice and endeavor to do a good assessment.
- Consider risk tolerance
Risk tolerance has to do with the degree to which you would be perturbed should you lose your investment. Whereas some will not be perturbed at all, others cannot stand losing their investment. Deciding on your risk tolerance informs the assets into which you can invest. A high-risk tolerant firm can invest in risky investments but risk-averse firms will usually consider investments with little or no risks.
- Consider diversification
In diversification, you spread your investment across a wide range of assets with different risk levels to reduce your chances of losing all your investment. Irrespective of your risk tolerance, it is vital to diversify your investment.
- Monitoring and follow-up
After undertaking all due diligence and being satisfied to commit your resources into an asset with a particular firm, you must from time to time monitor the progress of your investment. This will enable you to decide whether to discontinue the investment, reduce it or put in more financial resources.
Remember that money makes possible the enjoyment of the best the earth affords – George S. Clason.
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Very much in agreement with point 4. 'Consider diversification'. This indeed seeks to minimize the magnitude of risk if a single investment portfolio should fail.
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