What is investment analysis and its importance
Introduction
Investment analysis is an essential process of analyzing potential investments and ascertaining their feasibility based on profitability, risk, and possible sustainment in the long term. It is useful for investors aiming to increase return while minimizing risk, whether individual, institutional, or financial analyst. Many different methods and tools are employed in order to appraise different investment alternatives – equity, debt instruments, real estate, or business ventures.
This article expounds further on the importance of investment analysis, types it has, and how they can be practically applied in real-life contexts.
What is investment analysis?
This refers to the scrutiny and assessment of several possible investments about their attractiveness, appropriateness, risks and their returns. Decisions taken for actual investment can be from the above assessment of financial objectives by considering the associated risks and possible returns. It can purely be a method based on number-crunching; it could rely upon qualitative assessment or a mix of both of these approaches.
Thus, investment analysis is finding the best possible investments that balance and achieve two very important factors, namely, return and risk according to the goals of the investor. Whether it is stocks, real estate, or a company startup, investment analysis forms an organized basis in comparing the benefits versus the risks of two or more options for investments.
Why Investment Analysis is Important
Investment analysis serves as the important stepping stone between making an investment decision from individual and institutional aspects. It forms an indispensable process for the investor with the following factors:
Risk Management: All investments possess inherent risks including market volatility, economic downturn and many more. Investment analysis empowers the investor to look into the risk of any potential investment. With sound risk analysis, investors will shun bad decisio