Focus In Business Investment Opportunity

Filed Under Business Investment.

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The commitment of capital to any business either as passive or active member is known as Business investment. Usually business business Investinvestors prefer passive investment by purchasing bonds and stocks. The active investors usually provide the initial startup capital for the firm.

They may also provide the franchising finance or pre-IPO funds. Careful risk-return tradeoff analysis is the key to the fruitful business investment. The returns associated with business investment can be of moderate to high level depending on various factors like analysis of market, industry and Economy of the sector. Any investor must be aware of the updates in his surrounding environment to make a wise business investment decision.

Returns Associated With Business Investment

The opportunities in the business investment are dependent on the expected rate of profit or the return on the new venture.  The ROI or the return on investment is defined as the ratio of the amount gained with the invested capital. This is true for the active investor. In case of a passive investor, the one who invests in the shares and bonds, the return is in the form of steady income due to interest income from bonds and dividends from shares. The other types of gains to the passive investors are the capital gain that happens due to the increase in the price of bonds and shares over time.

One important factor in the business investment is the Time value of money. This means that the value of money decreases over time due to the inflation in the economy as well as the opportunity cost associated with the idle money. Thus, value erosion of the money due to inflation needs to be factored in before arriving at the actual realized annual percentage return on the investment. The real rate of return is what investor gets after factoring in all such external factors.

Opportunities in Business Investment

Business investmentThe business Investment seems to be the mantra of the today’s generation. Gone are the days, when investors preferred Government’s secured investment instruments. Thus, even though returns on such instruments were less, investors still bought them due to their inherent risk-free characteristics. However, today investors are seeing the high returns offered by the organizations and the ease at which any one can become business investors.

People start as a passive investors and gradually move to become the active investors. Investors with risk appetite go for the stocks of new organizations and short selling. On the other hand, the investors with risk averse approach lookout for stable organizations shares and spread the associated risk to different niches in which the organizations are operating.

The other opportunity in the business investment is in the field of derivatives trading. The derivative’s trading is one of the important tools with Finance Manager of any organization to hedge the risks of fluctuations in the interest rates and foreign exchange rates. There are several instruments and options, like call and put options that the finance manager can exercise to draw the investment or increase the investment in the organization’s benefit.

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