8 Stages to investment














The decision to embark on an investment extends beyond determining the profitability or otherwise of an investment, for example; an investment that is poorly provided or badly implemented may render and erstwhile investment proposal and exercise in futility because seen proposal may eventually turn out to out rightly unprofitable or manage to break-even. Investment can be in the form of capital assets or rural assets.
Investment planning should not only consider an exhaustive investment appraisal but take a panoramic or systemic view of proposals from the conception of the idea to its implementation even beyond to an ex-post evaluation leading to a follow-up action on such investment proposal.

A comprehensive investment decision process could therefore be seen in the form of investment cycle.
·     

  •     Investment identification and definition



A prospective investor will have to define where his areas of interest lie. For example, an investor must decide whether he is interested in investing in financial assts or real estate investment. He may further need to identify the industry/sector of his interest or that suits his investment objective.
The following indicators may serves as a guide to identifying profitable investment.
o   The data of imports, export and domestic consumption of an article serves as a pointer to the profitability or otherwise of an investment proposal / project. Base upon this figure, an operator will be able to decide on project whose supply is not in excess or product with high level of market demand.
o   A project can also be identified by making use of the input – output model. This model will indicate the input/out that crosses from one industry to the other. This relationship will help to determine the level of investment required to supplement imports. It will also indicate if demand can be expanded and hence the need to embark on new project.
o   A project can be initiated on the basis of identification of raw materials i.e, where there is abundant of raw materials, it may be profitable to embark upon project that make use of these raw materials.

·         Investment formulation, preparation and feasibility analysis



This is the investment simulation stage. It considers theoretical worthiness of the project, then the preparation and feasibility stage which seeks inter alia to find out the degree of feasibility of the investment. This is done by carrying out a feasibility study which collect and analyze data or statement about the project.

·        Project design




This stage sets to ensure that investment is adequately designed to meet the objective of the investor and the demand of the environment. For example, with respect to real investment, if a project is to located in area without water supply, the operator must improvise.

·         Investment appraisal




This is a details investment evaluation stage, during which the worthwhuileness of a project is determined.
The evaluation will inter alia seek to achieve the following;
o   Analyze the market demand to determine the level of demand
o   Collect and analyzed data on the cost structure of the investment
o   Analyze the profitability of the project
o   Identification of sources of raw materials
o   Analyze the manpower (skilled and unskilled) need of the project and its availability or otherwise within the economy




·         Project selection, negotiation financing and approval


Project selection involves making choice out of alternatives. This decision is facilitated through the investment appraisal procedure which must have estimated the profitability and degree of worthwilness of the projects for easy comparison and final choice. The acceptability of a project will therefore require negotiation for supply of machinery and other inputs. It also require making adequate arrangement for its financing operation and installation.

After this stage, the proposal is expected to be presented to the government or board (incase of a company) for evaluation and final approval

·         Monitoring, supervision and control implementation


This stage involves appointment of experts to implement the project (activation). It also includes the formulation of an organization to implement the project by negotiating with suppliers, agents(eg brokers), engineers, etc

·         Supervision, Monitoring and control stage


This stage is very important as it aims at ensuring that the  project is properly completed on time in order to avoid escalation of the project cost which has often been the major cause of projects abandonment or in the case of financial investment to ensure that the investment meet the aspiration of the investor.


Conclusion:   Taking the above steps into consideration, an investor should be conversant or follow those stages in investing on a project.

Post a Comment

0 Comments