Determining the return of an investment is a crucial aspect of business regardless of the investment one undertakes, be it real estate, new business ventures, stocks, name it. With every investor expecting returns from their investment, because of undertaking risk, it is often paramount to evaluate the investment by comparing the size and timing of expected gains to the investment costs. But the general principle is that invested money will generate profit only if it is subject to be lost and that the bigger the potential return, the higher the investment risk and the longer the suggested investment timeframe. Capital providers and investors are willing to take different levels of risk. Whereas some investors are high risk takers, others are very risk averse. As an investor you need not to be caught in a “what if I had” situation. You need to be in position having right strategies and operating plans in order to minimise the overall business and market risks. Given that the value of investments fluctuate often depending on the market situation and the overall economic trends, before investing you need to decide how comfortable you are with investment risk and how much risk you are prepared to take to achieve the returns you want. It will require understanding how the different asset classes work. You don’t want to lie awake worrying about your investments, so understanding your risk profile can help you get a good night’s sleep. Some times return verses risk is a very hard aspect but it becomes simpler if your risk profile is well known, in general you are trying to establish the type of investor you are. gahamanyi1@gmail.com
