Risk vs. return
We will tell you as many times as necessary, investing is risky, investing is the possibility of losing your money, and it can happen whether you do it in a startup or in the most successful multinational in the stock market.
Let me tell you one more time in this lesson: Never invest more than you can afford to lose. The goal of investing is to make money while helping to develop businesses, so take risks within limits, reasoning each investment, using common sense, informing yourself or surrounding yourself with those who know the most about the sector you are interested in.
The key word to achieve good profitability is DIVERSIFY.
The report "Siding with Angels" (2009, download report) provides a historical perspective on the return on 1080 investments made by business angels between 1998 and 2008:
- 44% of investments generated profitability
- 9% of investments increased on average 10 times the capital Invested and investors multiplied it by 2.2 times.
Based on this data, it is clear that the more you diversify, the more likely you are to multiply your money and reduce investment risk.
The objective of Capital Cell is to maximize investor returns and minimize risk as much as possible. Here you can see how we select and analyze the companies we publish.
Some ways to get your money back by making a profit:
- An IPO, i.e. the company has grown sufficiently large to go public.
- The total or partial purchase of the business by another company in the same sector.
- A sale to a fund provider, where the business is sold to a venture capital firm or private equity firm, to take the business to the next stage of development
- Through the generation of dividends, whereby investors earn profits while holding their shares in the company.
In the following 3 lessons, we will talk about the general investment risks, those related to participations and those that depend on the development of the company in which you want to invest.