I write a second article from this quatrain. The point is, I want to emphasize again is that in each investment you need to analyze and evaluate all three factors, profitability and reliability and liquidity, and if you do not find those factors, this is no longer an investment.
Reliability of the investment
I give you an example of it – the most reliable, one of the most reliable. A deposit in a state bank, not higher than the amount that is guaranteed by the state. Since we are considering reliability, even in this example there are risk factors.
Such an investment is unlikely to turn into a hopeless one, and risk factors – unplanned increases in the term of the investment.
That is, your medium-term investment, for example, for 3 years, a deposit of not more than the amount that the state guarantees in a state bank can go into the long-term one very easily, especially in countries with developing economies. Usually these factors are very small and do not work out often.
The reliability of an investment can, as a rule, is paralleled with profitability. That is, the higher the reliability, the lower the profitability is and the lower the reliability, the higher the profitability is.
Knowing this rule will help you test yourself in your analytics.
Well, this is not always, not 100% of cases. It may not be so, I’ll try to find an example of an exception. Such a situation can be more in active investments than in passive ones, that is, in those cases when you invest yourself and participate in the creation of profit.
But then it’s logical to add your work to the amount of cash investments in order to calculate your profit correctly. Because you could sell your work for money and you need to take this into account, the size of your contribution, both monetary and resource time.
And very often people in such situations are mistaken in the calculations.
So, an example of a high-yield and low-risk investment
You have developed, or rather improved, any device or mechanism and its operation has become cheaper. Competitors use the regular version and the product that they produce on it has a higher cost than using your technology. Most likely you are well versed in the industry you are exploring. To launch your know-how into production, you lent $ 2,500 from three of your friends, invested another $ 2,500 yourself. Established serial production. Clients are located immediately, and profits go more than everyone expected.
It turns out that the four of them invested 25% of the required amount of cash investment to start. You took the least risk because you were confident in the technology, you controlled and led the startup process. But, you worked the most, so your contribution is not 25%.
Calculate the average salary for the same position for the investment period and add $ 2,500 to the amount of your financial investment. Now you can see your full cost picture.
And so, for example, it turns out that something about $ 5,000 is your contribution and three of your friends invested $ 2,500 each. Total: it turns out 100% – 12,500. Then your contribution will not be 25%, but 40%, respectively. If you received $ 2,500 profit per year, then this is not 100% of your financial contribution, but less, because your contribution was equal to $5,000.
Nevertheless, you have received a highly profitable investment at high risk.
Why was there a high risk? Because every new project is a high risk.
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