The following considerations should be made before you invest your hard earned money:
- Do you possess the relevant business knowledge in the project you’re considering? Don’t invest in things you don’t understand. Stay within your circle of competence.
- What is the projected return on investment? The anticipated return should be higher than safer bets like treasury bills. If you can easily earn 10% from treasury bills you should not risk your money for anything less.
- What is the investment requirement? How much will you need and how will you mobilize the funds. Cut your coat according to your cloth and invest within your means.
- How much leverage is required? Will you require debt? How much are you able to borrow? Do you have the collateral?
- When do you get your money back? What is your payback period? The shorter the period the lower the risk?
- What are the risks involved? Identify the key risks involved and put in place mechanisms like insurance to protect yourself.
- Are there any safeguards? What happens if the project were to fail? Would you be able to recover? Do you have sufficient reserves to carry you forward?
- Who are your business partners? Are you businesses partners credible and people of integrity? Partner with mature and experienced people who know what they are doing.
- How does this investment fit into your asset portfolio? You want to have a diversified portfolio of assets to weather any storm. How does this particular investment fit into the grand scheme of things?
- Can you find a more suitable investment? We tend to make better decisions when we are presented with more than one option. Is this the best use of your money? Can you find something better and safer?
While you should carefully consider any investment option, you should not get stuck in analysis mode. At some point you will have to make a decision and ACT with FAITH and COURAGE.