Most aspiring investors who are seeking to make investments would rather seek to know, who are investors and what are their roles. The answer will give them firsthand information on what they are trying to embark on.
Who are Investors?
An investor is either an individual or an organization who willingly and out of zeal allocates a certain amount of funds to a scheme with the expectation of a future financial reward.
Certain futures differentiate an individual from an investor. Ordinarily, anyone who dedicates money to a particular plan like setting up a business or funding a project automatically becomes an investor.
However, real investors perform certain roles that make them exceptional from ordinary individuals who appear to set up a business as a means of living.
For instance, an individual may willingly fund a fellow individual’s business from a start-up with the expectation of gaining financial profit.
An individual may also decide to invest in one of the securities like stocks, mutual funds, and bonds. In the end, receives dividends known as profit according to the company’s memorandum of association.
Again, an individual may choose to invest in a Child’s education with the hope that the child will become a professional in a particular field of learning. This can make the individual become an investor as the child will become useful to the society in future.
The above instances are different from the individual who sets up a business in the field of buying and selling and receives an immediate reward.
How individuals become investors
From all areas of life, globally people are searching in one way or the other how to grow business and increase revenue.
Sometimes when a business reports excess revenue, the need to shift some portion of the income becomes necessary.
This excess income makes the individual seek to establish a plan that can be beneficial to other individuals. They can do this by creating industries or firms that aid employment.
Sometimes too when a business reports a deficit it also becomes necessary for the individual to seek a way of filling up the gap. They can do this by using the available fund or acquiring a loan to invest in a plan that will yield more revenue.
Thus, we have two main types of investors that escalate to other types of investors. Hence, we have Retail and Institutional investors and other investors: the Angel, Venture capitalist, Peer-to-peer, and Sweat equity investors.
The Roles of an Investor
1. Understand your instrument of investment
Investors who are willing to invest in any of the securities or fund any business set-up must have an established experience on the line of their investment proposal.
It is as good as saying that an individual cannot just come up with a plan to engage in a raw material business without initially learning the business. The end of it could be disastrous as acting on ignorance could be dangerous.
Therefore, it is the role of the investor to find out and gain a good knowledge of what type of investment to undertake. It could be funding a business, investing in assets, or buying security for future gain.
2. Open an investment account
The role of an investor includes establishing an account that aligns with the style of investment. Investors in security need an investment account, like opening a brokerage account, which can help facilitate their investing plan.
Every investor at a point may decide to borrow a loan (margin account) or sell an asset in other to fund more business.
Investors that fund businesses however dedicate their funds and derive the profit at a future time. They are financial institutions and can make use of their investment banks.
3. Be responsive about your plan
Investors need determination skills; hence, slack in the plan may result in a loss of resources.
For instance, an investor who undertakes to fund a business will not only dedicate funds but also contribute to the activities that will enhance the progress of the business.
Likewise, an individual who invests in stocks or commodities will have good knowledge of the investment method. The investor will also have a good knowledge of the stock market, price fluctuations, and stock diversification.
4. Do not compromise issues
As an investor, do not ignore your duties for less critical issues. It may affect your obligation. Again, an investor can make suggestions based on experience and knowledge and stick to them. So far, it can benefit the organization.
5. Be your boss
The fact that investors invest their capital in any instrument or business gives them the eligibility to assume ownership or co-ownership of the investment. This is the more reason why an investor has to invest in his or her line of experience. Being an expert in the field will afford the investor the right to make decisions and suggestions
Futures of an investor
1. Become enthusiastic about learning
Investing involves the willingness to commit some funds and the knowledge to handle risk. An investor needs to be aware of all this and not just be mindful but also have a keen interest to learn and gain managerial skills.
2. Gain a good knowledge of the investment market
Investors in security need to be alert to current stock market prices and changes, when to sell, and when to hold. Then in terms of funding a business, the investor goes on the line of expertise.
3. Develop your investment strategy
Investors do not just make decisions and implement them. There are some sets of principles to apply that will help them achieve their goals. Therefore becoming an investor entails using some approach to gain accomplishment. You need to develop your strategies.
4. Choose a long-term investment plan
Both long-term and short-term investment plans can be achievable. Hence taking a long-term plan can help the investor plan more on prospects and minimize volatility. A long-term investment plan can help the investor to implement every decision made and achieve the desired goals.
5. Be alert on risk management
The investor needs to understand that risk is part of an investment; therefore taking every measure to curb or minimize loss is important.
6. Be willing to build.
Be patient with your investment plan and do not give up easily. It may happen that you are not getting the right or expected result, which usually happens at the beginning. Then give it time while still making an effort for success.
Where can an investor invest?
There are different methods these investors apply in other to actualize their goals of acquiring more revenue. Consequently, it all bores down on the particular individual or organization that is carrying out the plan.
There are different methods or instruments with which investors can allocate their funds. These instruments include but are not limited to Stocks, Mutual funds, Estate Management, Bonds, Fixed Deposits, etc. Click here for different types of investments.
Individuals can also decide to be Angel investors or venture capitalists, where they can seek firms with greater potential and allocate capital from the start.
Irrespective of the risk involved (as each of these investments carries its own risk) all the investment methods are profitable.
How do investors manage Risk?
The need to fulfill certain objectives stimulates the desire for these investors to go through the odds of dedicating their capital. This same desire gives them the confidence to undergo risk tolerance.
Diversification of assets could help the investor when coping with risk tolerance. For instance, investing in several other securities at a time can help to cover the loss of one against the other.
While in the case of funding a business start-up, regularly monitoring every activity and implementing good decisions is a way of avoiding and coping with risk.
There are different ways individuals can dedicate money to a plan and in return expects a financial reward. The different ways sum up investment, the private investor invests on the mission of achieving personal financial goals.
The angel investor and the venture capitalist join forces to accomplish goals and then gain profit in return.
One thing very common among investors is the action of fund commitment and the wiliness to handle every risk.