How Can Profitable Investment Opportunities Be Identified?

According to Ambassador Arjan, in an inflationary economy, investment is not just an action to earn more profit; Rather, it is one of the ways to protect the property value against price increases. During periods when prices are rising rapidly, many are looking for a way to identify the best investment opportunity. But the reality of the market is that achieving financial success does not necessarily go through the path of "overnight profits". Financial success is more likely when we are realistic and able to distinguish real opportunities from false advertising promises. In this article, we discuss the criteria for identifying these opportunities.

What criteria should we check to identify a profitable investment opportunity?

Buying an asset without fundamental analysis and accurate calculations can expose capital to considerable risk. In order to find high-return investment methods among unverified advertisements and claims and distinguish dubious projects from real and productive markets, you need to consider some specific economic criteria.

The first and most important criterion is the balance between risk and return. In economics, higher expected returns are usually associated with higher risk acceptance. A plan is worth considering and investing if its possible profit is proportional to the risk of sudden fluctuations, changes in laws and price increases. If somewhere you are promised very high profits without any risk, you should doubt its validity and do more research before making any decision.

The second criterion, which may be overlooked during periods of market volatility, is the speed at which assets are converted into cash. It should be checked how quickly, at what cost, and how close to its daily value, the asset in question will be converted into cash at the time of need. Some investors have bought assets with high nominal returns, but have faced declining demand and difficulty selling during periods of recession; This situation shows the importance of liquidity in evaluating investment options.

The time horizon and intrinsic value of the property should not be neglected; Because each market has its own time characteristics, and gold or real estate behave differently than the stock market. On the other hand, an option can be considered a real high-yielding investment that has an economic basis and an appreciable profit capacity, rather than an asset whose price has increased only under the influence of emotional expectations.

What to look for when it comes to multiples?

Attention to the markets increases when it comes to an investment with 2 times or even multiple profits. Achieving such returns is possible in some market conditions, but entering these high-risk markets requires careful investigation to determine where this profit comes from and how sustainable it is.

Part of the high yields can be the result of proper understanding of the general state of the economy. Markets do not necessarily move in an upward direction; They have periods of high inflation, bubbles, recessions and price falls. Someone who knows the behavior of the market may stay away from emotional decision-making during bullish periods and explore investment opportunities when prices fall. Such an approach can provide the basis for obtaining higher efficiency; However, identifying the price floor and the exact time of market return is associated with uncertainty.

The second point to be investigated is the main cause of price growth. It should be checked whether this price increase is caused by real demand, production and fundamental profitability or is it just influenced by rumors and emotional behavior of traders? The growth of prices that do not have a clear economic support may not be sustainable and investors will face losses.

In addition, tools such as investment loans and side costs should also be considered. Financial leverage tools can increase investment returns, but if the market moves contrary to expectations, they also exacerbate losses and may even wipe out a large portion of capital. It is also necessary to deduct fees, money transfer costs and related taxes from profits to calculate a comparable net return.

How to compare different investment opportunities?

Investors who are interested in preserving the value of their assets usually find it risky to focus all their capital on one option. But how to choose between different options such as buying property, entering the gold market, buying stocks or fixed income funds? The answer is clear in the comparison of assets based on economic criteria.

One of the specialized ways is to measure the real value of profit over time. It simply shows what the future profit is worth today, taking into account the rate of inflation and changes in the value of the currency. With this method, it is possible to make a decision based on a more accurate assessment and prioritize high-yield investment opportunities according to the actual yield.

The next criterion is to compare the expected return of a market with a less risky option. That is, the potential return of a volatile market, such as the stock market or gold, is compared to the return of less risky options, such as certain fixed income funds or bank deposits. If the difference between these two numbers is not proportional to the risk and costs of accepting market fluctuations, it may be more economically appropriate to choose the less risky option.

Finally, in order to achieve an investment with high profit, one should also pay attention to the degree of correlation between assets. If the assets have a similar reaction to an economic event or exchange rate change, they may fall in price simultaneously. Combining assets with different behaviors can reduce the risk of the entire portfolio; However, diversification alone does not guarantee that a portion of a portfolio will be profitable in all market conditions or that the entire portfolio will be protected against depreciation.