The article selected is on investment risks and returns, and it is relevant to the current discussion topic in this entrepreneurship class. There have been several questions on how risks are established together with the expected returns for potential investors in any business. The poor performance of firms in the stock markets makes it vital for entrepreneurs to analyze the risks and returns when screening for business opportunities. I have learnt from the article that one way to do this is by comparing the risks and benefits associated with buying stock in a company to purchasing a publically traded firm’s stocks. This will provide a better footing because owning stock in small businesses versus being a NASDAQ’s stockholder is negotiable for most investors. Thus, as an entrepreneur, my objective will be to present my ventures in a professional manner with financial together with a disclosure of product marketing and business model that is sensible to investors. This will enable them to forecast the company’s position in the targeted market. Outlining the specific risks that are facing a business is an ideal way to deal with relative risks. Another method that can be used to outline the risks is by laying them next to other comparable investments together with other respective risks. Here, the company with lesser risks can be selected for investment.
Gauging the expected returns is difficult especially if there are more than two competing investments. Returns are estimated based on various outcomes in a company that takes place under different scenarios during the operations of a firm. If there is too much optimism, expected returns are too high, but if pessimism is used, the expected returns are low. A good way to gauge expected returns of a company does not entail primarily relying on stock reports (Newton). Individually checking things out as well as having direct access to reports produced by the senior management is the best way to ascertain the expected returns.
Link to the article: https://www.entrepreneur.com/article/59016
Work cited
Newton, David. "Investment Risks and Returns." Entrepreneur. N.p., 2003. Web. 17 May 2016.
