What do investors look for in a person?
A strong narrative
Investors want to know the size of the overall market and the total number of potential clients. The investor would hesitate to invest if the planned market size is insufficient since they might not receive sufficient profits. It must be remembered that the company should be sustained over the long term.
Financial Requirements and Forecasts: Investors want to know how much money you're looking for, what you plan to do with it, and what your financial expectations are. Over the next 5 years, your financial predictions should reflect your projected sales, costs, and profits.
Financial stability
Investors will want to see information that indicates the current financial status of the business. Usually, they will expect to see current reports such as a profit and loss statement, a balance sheet and a cash flow statement as well as projections for the next two or three years.
Distributions received by an investor depend on the type of investment or venture but may include dividends, interest, rents, rights, benefits, or other cash flows received by an investor.
Investor personality can provide insight about what kind of investments a person is likely to make. World-renowned psychologist Adrian Furnham, PhD, professor at BI Norwegian Business School, recently joined our podcast, The Science of Personality, to speak about his latest research on investor personality.
More than anything, early-stage business investors want to see a return on their investment (ROI). If you can demonstrate that your business will make them money, then you're 90% of the way there. If your company has been up and running for a while, then you need to show excellent financial performance so far.
Value investors are bargain hunters who use metrics like PE ratio and free cash flow to identify cheap stocks with long-term potential. This kind of investing often involves a lot of time-consuming research. It also usually means buying individual stocks, which can be pricey.
An investor is an individual that puts money into an entity such as a business for a financial return. The main goal of any investor is to minimize risk and maximize return. It is in contrast with a speculator who is willing to invest in a risky asset with the hopes of getting a higher profit.
Successful investors don't look at what's happening now. Instead, by studying the momentum of a company or an entire economy and how it interacts with its competitors, they invest now for what will happen later. They are always forward-thinking.
What data do investors look at?
Investors can use key reports, such as a balance sheet, cash flow statement, and income statement, to evaluate a company's performance, helping to make more informed investment decisions.
What Are the 3 Types of Investors in a Business? The three types of investors in a business are pre-investors, passive investors, and active investors.
Trade-offs must be weighed and evaluated, and the costs of any investment must be contextualized. To help with this conversation, I like to frame fund expenses in terms of what I call the Four C's of Investment Costs: Capacity, Craftsmanship, Complexity, and Contribution.
People invest money to make gains from their investments. Investors may earn income through dividend payments and/or through compound interest over a longer period of time. The increasing value of assets may also lead to earnings. Generating income from multiple sources is the best way to make financial gains.
There are, however, a number of words of wisdom to take on board and pitfalls for a business to avoid when taking their first big step. A lot of advisors would argue that for those starting out, the general guiding principle is that you should think about giving away somewhere between 10-20% of equity.
Most investors would view an average annual rate of return of 10% or more as a good ROI for long-term investments in the stock market.
Analyzing the survey data, Jiang and his coauthors found that individuals with high openness and low neuroticism tended to invest more in equities—including individual stocks and stock funds. Agreeableness and conscientiousness, on the other hand, played a less significant role in financial decision-making.
3.2 Five Factor Personality Model
These five domains are Openness to experience, Conscientiousness, Extraversion, Agreeableness, and Neuroticism.
The Traits of a Good Investor
A good investor understands that success is not built overnight. They are willing to hold onto their investments through market fluctuations, avoiding knee-jerk reactions driven by short-term volatility. Patience allows them to benefit from the compounding effect over time.
Ask for regular advice and feedback
Be sure that you're clear with what you most want help with. To get the most from this partnership, keep them updated with updates - regular meetings or a monthly email. Remember, your investor has invested in you and your organisation because they believe in you.
How does an investor exit?
Exit strategies
Venture capital (VC) investors may decide to sell their investment and exit a company. Alternatively, the company's management can buy the investor out (known as a 'repurchase'). Other exit strategies for investors include: sale of equity to another investor - secondary purchase.
You Want a More Active Partner
If you're looking for someone who will be more involved in the business, an investor might be a better choice. Investors often take a more active role in the businesses they invest in, offering guidance and support as needed.
As an investor, selecting and adhering to your chosen asset allocation is job number one. Before you decide to buy an investment, ask yourself, "Will stock XYZ or fund ABC fit into my asset allocation and provide enough potential growth to justify its risk?" If not, it's not the investment for you.
Value investors often make decisions similar to what Ben Graham did, based on the business looking cheap, but Rule One investors know that it is better to buy a wonderful business at a fair price than a fair business at a wonderful price.
Passive investing broadly refers to a buy-and-hold portfolio strategy for long-term investment horizons with minimal trading in the market. Index investing is perhaps the most common form of passive investing, whereby investors seek to replicate and hold a broad market index or indices.
