An entrepreneur must establish a system to manage an investment portfolio. An investment management system will have the following: 1. Investment purpose: This is the overall plan for investment activities. The Investment purpose determines the direction you would want to invest in and also indicates your desired compensation from investments. It helps you focus while at the same time giving you clarity when investment opportunities present themselves. The investment plan may change from time to time depending on the overall agenda off the business. An example of an investment plan is to diversify into up market real estate property. 2. Investment policy: This details the risk appetite of the investor. The risk appetite is likely to change at each level of growth. An investment policy will help the entrepreneur protect against reckless investments opportunities and prevent losses. Reckless opportunities could be illegal schemes or investments that are too diverse or complex. An investment policy would also put a floor on the rate of return that is acceptable for any new investments. 3. Capital policy: A capital policy will indicate the preferred source of capital and the acceptable mix of capital depending on the level of growth of the business. It will also stipulate the limits the business should have on one particular source of capital. An example of a capital limit is 60% equity and 40% debt.
Posted on: Mon, 20 Jan 2014 03:59:39 +0000
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