How to Do Technical Analysis.

How to Do Technical Analysis.

Technical analysis evolved from the stock market theories of Charles Henry Dow, founder of the Wall Street Journal and co-founder of Dow Jones and Company. The goal of technical analysis is to predict the future price of stocks, commodities, futures and other tradeable securities based on past prices and performance of those securities. Technical analysts apply the law of supply and demand to understand how the stock market and other securities exchanges work, identifying trends and profiting from them. The following steps will help you understand technical analysis and how it is applied to choosing stocks and other commodities.

Steps.
1. Understand Dow's theories behind technical analysis. Three of Dow's theories about investments form the underpinnings of technical analysis and serve to guide the technical analyst's approach to financial markets. Those theories are described below with an explanation of how technical analysts interpret them.
Market fluctuations reflect all known information. Technical analysts believe that changes in the price of a security and how well it trades in the market reflect all the available information about that security as garnered from all pertinent sources. Price listings are therefore thought of as fair value. Sudden changes in how a stock trades often precedes major news about the company that issued the stock. Technical analysts don't concern themselves with the price-to-earnings ratio, shareholder equity, return on equity or other factors that fundamental analysts consider.
Price movements can often be charted and predicted. Technical analysts acknowledge that there are periods when prices move randomly, but there are also times when they move in an identifiable trend. Once a trend is identified, it is possible to make money from it, either by buying low and selling high during an upward trend (bull market) or by selling short during a downward trend (bear market). By adjusting the length of time the market is being analyzed, it is possible to spot both short- and long-term trends.
History repeats itself. People don't change their motivations overnight; traders can be expected to react the same way to current conditions as they did in the past when those same conditions occurred. Because people react predictably, technical analysts can use their knowledge of how other traders reacted in the past to profit each time conditions repeat themselves. In this respect, technical analysis differs from "efficient market theory," which ignores the effect that human actions and reactions have on the market.
2. Look for quick results. Unlike fundamental analysis, which looks at balance sheets and other financial data over relatively long periods of time, technical analysis focuses on periods no longer than a month and sometimes as short as a few minutes. It is suited to people who seek to make money from securities by repeatedly buying and selling them rather than those who invest for the long term.
3. Read charts to spot price trends. Technical analysts look at charts and graphs of security prices to spot the general direction in which prices are headed, overlooking individual fluctuations. Trends are classified by type and duration.
Up trends, characterized by highs and lows that become progressively higher.
Down trends are seen when successive highs and lows are progressively lower.
Horizontal trends in which successive highs and lows fail to change much from previous highs and lows.
Trend lines are drawn to connect successive highs to each other and successive lows to each other. This makes spotting trends easy. Such trend lines are often called channel lines.
Trends are classified as major trends when they last longer than a year, as intermediate trends when they last at least a month but less than a year, and as near-term trends when they last less than a month. Intermediate trends are made up of near-term trends, and major trends are made up of near-term and intermediate trends, which may not go in the same direction as the larger trend they are part of. (An example of this would be a month-long downward price correction in a year-long bull market. The bull market is a major trend, while the price correction is an intermediate trend within it.)
Technical analysts use four kinds of charts. They use line charts to plot closing stock prices over a period of time, bar and candlestick charts to show the high and low prices for the trading period (and gaps between trading periods if there are any), and point and figure charts to show significant price movements over a period of time.
Technical analysts have coined certain phrases for patterns that appear on the charts they analyze. A pattern resembling a head and shoulders indicates that a trend is about to reverse itself. A pattern resembling a cup and handle indicates that an upward trend will continue after pausing for a short downward correction. A rounding bottom, or saucer bottom pattern indicates a long-term bottoming out of a downward trend before an upswing. A double top or double bottom pattern indicates two failed attempts to exceed a high or low price, which will be followed by a reversal of the trend. (Similarly, a triple top or bottom shows three failed attempts that precede a trend reversal.) Other patterns include triangles, wedges, pennants and flags.
4. Understand the concepts of support and resistance. Support refers to the lowest price a security reaches before more buyers come in and drive the price up. Resistance refers to the highest price a security reaches before owners sell their shares and cause the price to fall again. These levels are not fixed, but fluctuate. On a chart depicting channel lines, the bottom line is the support line (floor price for the security), while the top line is the resistance line (ceiling price). Support and resistance levels are used to confirm the existence of a trend and to identify when the trend reverses itself.
Because people tend to think in round numbers (10, 20, 25, 50, 100, 500, 1,000, and so on), support and resistance prices are often given in round numbers.
It is possible for stock prices to rise above resistance levels or fall below support levels. In such cases, the resistance level may become a support level for a new, higher resistance level; or the support level may become a resistance level for a new, lower support level. For this to happen, the price has to make a strong, sustained change. Such reversals may be common in the short term.
Generally, when securities are trading near a support level, technical analysts tend to avoid buying because of concern for price volatility. They may, however, buy within a few points of that level. Those who sell short use the support price as their trading point.
5. Pay attention to the volume of trades. How much buying and selling goes on indicates the validity of a trend or whether it's reversing itself. If the trading volume increases substantially even as the price rises substantially, the trend is probably valid. If the trading volume increases only slightly (or even falls) as the price goes up, the trend is probably due to reverse itself.
6. Use moving averages to filter out minor price fluctuations. A moving average is a series of calculated averages measured over successive, equal periods of time. Moving averages remove unrepresentative highs and lows, making it easier to see overall trends. Plotting prices against moving averages, or short-term averages against long-term averages, makes it easier to spot trend reversals. There are several averaging methods used.
The simple moving average (SMA) is found by adding together all the closing prices during the time period and dividing that sum by the number of prices included.
The linear weighted average takes each price and multiplies it by its position on the chart before adding the prices together and dividing by the number of prices. Thus, over a five-day period, the first price would be multiplied by 1, the second by 2, the third by 3, the fourth by 4 and the fifth by 5.
An exponential moving average (EMA) is similar to the linear moving average, except that it weighs only the most recent prices used in computing the average, making it more responsive to the latest information than a simple moving average.
7. Use indicators and oscillators to support what the price movements are telling you. Indicators are calculations that support the trend information gleaned from price movements and add another factor into your decision to buy or sell securities. (The moving averages described above are an example of an indicator.) Some indicators can have any value, while others are restricted to a particular range of values, such as 0 to 100. The latter indicators are termed oscillators.
Indicators may be either leading or lagging. Leading indicators predict price movements and are most useful during horizontal trends to signal uptrends or downtrends. Lagging indicators confirm price movements and are most useful during uptrends and downtrends.
Trend indicators include the average directional index (ADX) and the Aroon indicator. The ADX uses positive and negative directional indicators to determine how strong an uptrend or downtrend is on a scale of 0 to 100. Values below 20 indicate a weak trend and over 40 a strong one. The Aroon indicator plots the lengths of time since the highest and lowest trading prices were reached, using that data to determine the nature and strength of the trend or the onset of a new trend.
The best known volume indicator is the moving average convergence-divergence (MACD) indicator. It is the difference between two exponential moving averages, one short-term and the other long-term, as plotted against a center line that represents where the two averages equal each other. A positive MACD value shows that the short-term average is above the long-term average and the market should move upward. A negative MACD value shows that the short-term average is below the long-term average and that the market is moving downward. When the MACD is plotted on a chart, and its line crosses the centerline, it shows when the moving averages that make it up cross over. Another volume-related indicator, the on-balance volume (OBV) indicator, is the total trading volume for a given period, a positive number when the price is up and a negative number when the price is down. Unlike the MACD, the actual value of the number has less meaning than whether the number is positive or negative.
How frequently securities are being traded is tracked by both the relative strength index (RSI) and the stochastic oscillator. The RSI ranges from 0 to 100; a value over 70 suggests that the security being evaluated is being bought too frequently, while a value under 30 suggests it is being sold too frequently. RSI is normally used for 14-day periods but may be used for shorter periods, making it more volatile. The stochastic oscillator also runs from 0 to 100. It signals too frequent buying at values over 80 and too frequent selling at values under 20.

Community Q&A

Question : What is meant by selling short during a downward trend?
Answer : It means borrowing shares of stock from a broker in order to sell them at one price, then waiting for their price to drop (in the "downward trend") so you can buy them back at the lower price, thus making a profit (at which point you give the shares back to the broker). This is purely a gamble (but a popular one among some professional investors).
Question : What is meant by "buy at pullback and sell at strength"?
Answer : That's another way of saying "buy low, sell high." A "pullback" is a reversal in a rising trend, offering a brief opportunity to buy at a relatively low price. "Strength" is a high price relative to recent levels.
Question : What is meant by saying, "Buy low, sell high"?
Answer : It means you should sell shares only when they are valued at a price higher than the price at which you purchased them. In practice, it means you should buy shares only after they have recently fallen in price, and you should sell shares only after they have recently risen in price -- again assuming the selling price is higher than the original purchase price. That's not always easy to do, but that's the theoretical objective in owning stock.
Question : How can I watch how technical analysis works?
Answer : You would have to find and contact a value investor, and ask if they would let you observe them at work. A stockbroker might be able to help you find such an investor.

Tips.

While most brokerage houses are geared toward long-term investing and employ mostly fundamental analysts, many now employ a few technical analysts as well.

Warnings.
Although some technical analysts use a single indicator or oscillator to tell them whether to buy or sell, indicators are best used in conjunction with one another and with price movements and chart patterns.
Know the limitations of technical analysis: it doesn't always work. For example, the most perfect head and shoulder top pattern possible may be formed (thought to be an extremely bearish technical indicator), and you sell the stock, only to see a huge extended rally from there, leaving you behind. Do not rely exclusively on technical analysis. Use it as a guide, and combine it with fundamental analysis.

June 25, 2020

How to Build a Stock Portfolio

How to Build a Stock Portfolio.

The stock market and its potential for risk intimidates many people. Nonetheless, a well-built stock portfolio is likely to outperform other investments over time. It is possible to build a stock portfolio alone, but a qualified financial planner can help. Knowing your goals and your willingness to take risks in advance, as well as understanding the nature of the market, can help you build a successful portfolio.

Part 1 Designing Your Portfolio.
1. Know what you're willing to invest. As you invest, you'll need to balance your potential risks against your potential rewards. A portfolio's assets are typically determined by the investor's goals, willingness to take risks, and the length of time the investor intends to hold his portfolio. Some of the most important factors to consider in making these decisions are:
The investor's age.
How much time the investor is willing to spend allowing his investments to grow.
Amount of capital the investor is willing to invest.
Projected capital needs for the future.
Other resources investor may have.
2. Decide what kind of investor you'll be. Portfolios usually fall somewhere in the spectrum between aggressive, or high-risk portfolios, and conservative, or low-risk portfolios. Conservative investors simply try to protect and maintain the value of a portfolio, while aggressive investors tend to take risks with the expectation that some of those risks will pay off. There are various online risk assessment tools you can utilize to help assess your risk tolerance.
Understand that your financial goals may change over time, and adjust your portfolio accordingly. Generally, the younger you are, the more risk you can afford or are willing to take. You may be better served with a growth-oriented portfolio. The older you become, the more you'll think about retirement income, and may be better served with an income-oriented portfolio.
Even during retirement, many still need some portion of their portfolio for growth, as many people are living 20, 30 or more years beyond their retirement date.
3. Divide your capital. Once you've decided what kind of investor you'd like to be and what type of portfolio you want to build, you'll need to determine how you intend to allocate (spread around) your capital. Most investors who are new to the market don't know how to pick stocks. Some important factors include:
Determining which sector(s) to invest in. A sector is the category a given industry is placed in.[8] Examples include telecommunications, financial, information technology, transportation and utilities.
Knowing the market capitalization (aka market cap), which is determined by multiplying a given company's outstanding shares by the current price of one share on the market (large-cap, mid-cap, small-cap, etc.).
It is important to diversify holdings across a variety of sectors and market capitalization to lower a portfolio's overall risk.

Part 2 Making Investments.
1. Understand the different kinds of stocks. Stocks represent an ownership stake in the company that issues them. The money generated from the sale of stock is used by the company for its capital projects, and the profits generated by the company's operation may be returned to investors in the form of dividends. Stocks come in two varieties: common and preferred. Preferred stocks are so called because holders of these stocks are paid dividends before owners of common stocks. Most stocks, however, are common stocks, which can be subdivided into the categories below:
Growth stocks are those projected to increase in value faster than the rest of the market, based on their prior performance record. They may entail more risk over time but offer greater potential rewards in the end.
Income stocks are those that do not fluctuate much but have a history of paying out better dividends than other stocks. This category can include both common and preferred stocks.
Value stocks are those that are "undervalued" by the market and can be purchased at a price lower than the underlying worth of the company would suggest. The theory is that when the market "comes to its senses," the owner of such a stock would stand to make a lot of money.
Blue-chip stocks are those that have performed well for a long enough period of time that they are considered fairly stable investments. They may not grow as rapidly as growth stocks or pay as well as income stocks, but they can be depended upon for steady growth or steady income. They are not, however, immune from the fortunes of the market.
Defensive stocks are shares in companies whose products and services people buy, no matter what the economy is doing. They include the stocks of food and beverage companies, pharmaceutical companies and utilities (among others).
Cyclical stocks, in contrast, rise and fall with the economy. They include stocks in such industries as airlines, chemicals, home building and steel manufacturers.
Speculative stocks include the offerings of young companies with new technologies and older companies with new executive talent. They draw investors looking for something new or a way to beat the market. The performance of these stocks is especially unpredictable, and they are sometimes considered to be a high-risk investment.
2. Analyze stock fundamentals. Fundamentals is the term given to the pool of qualitative and quantitative data that are used to determine whether or not a stock is a worthwhile investment in a long-term analysis of the market. Analyzing a company's fundamentals is usually the first step in determining whether or not an investor will buy shares in that company. It is imperative to analyze fundamentals in order to arrive at a company's intrinsic value - that is, the company's actual value as based on perception of all the tangible and intangible aspects of the business, beyond the current market value.
In analyzing the fundamentals of a company, the investor is trying to determine the future value of a company, with all of its projected profits and losses factored in.
3. Analyze qualitative factors. Qualitative factors, such as the expertise and experience of a company's management, various courses of industry cycles, the strength of a company's research and development incentives, and a company's relationship with its workers, are important to take into account when deciding whether or not to invest in a company's stock. It's also important to understand how the company generates its profits and what that company's business model look like in order to have a broad spectrum of qualitative information about that company's stock options.
Try researching companies online before you invest. You should be able to find information about the company's managers, CEO, and board of directors.
4. Look at the price-to-earnings ratio. The P/E ratio can be figured as either the stock's current price against its earnings per share for the last 12 months ("trailing P/E") or its projected earnings for the next 12 months ("anticipated P/E"). A stock selling for $10 per share that earns 10 cents per share has a P/E ratio of 10 divided by 0.1 or 100; a stock selling for $50 per share that earns $2 per share has a P/E ratio of 50 divided by 2 or 25. You want to buy stock with a relatively low P/E ratio.
When looking at P/E ratio, figure the ratio for the stock for several years and compare it to the P/E ratio for other companies in the same industry as well as for indexes representing the entire market, such as the Dow Jones Industrial Average or the Standard and Poor's (S&P) 500.
Comparing the P/E of a stock in one sector to that of a stock in another sector is however, not informative since P/E's vary widely from industry to industry.
5. Look at the return on equity. Also called return on book value, this figure is the company's income after taxes as a percentage of its total book value. It represents how well shareholders are profiting from the company's success. As with P/E ratio, you need to look at several years' worth of returns on equity to get an accurate picture.
6. Look at total return. Total return includes earnings from dividends as well as changes in the value of the stock. This provides a means of comparing the stock with other types of investments.
7. Try investing in companies trading below their current worth. While a broad spectrum of stock investments is important, analysts often recommend buying stock in companies that are trading for lower than they are worth. This sort of value investing does not, however, mean buying "junk" stocks, or stocks that are steadily declining. Value investments are determined by comparing intrinsic market value against the company's current stock share price, without looking at the short-term market fluctuations.
8. Try investing in growth stocks. Growth stocks are investments in companies that exhibit or are predicted to grow significantly faster than other stocks in the market. This involves analyzing a given company's present performance against its past performance amid the industry's ever-fluctuating climate.

Part 3 Maintaining Your Portfolio.
1. Avoid dipping into investments. Once you've invested capital in a stock, it's important to let the stock grow for at least a year without selling your shares. Consider for all intents and purposes that this money cannot be withdrawn and spent elsewhere.
As part of investing for the long term, determine the amount of money you can afford to commit to the stock market for five years or longer, and set that aside for investing. Money you'll need in a shorter period of time should be invested in shorter-term investments such as money-market accounts, CDs or U.S. Treasury bonds, bills or notes.
2. Diversify your portfolio. No matter how well a stock might be doing at the moment, the price and value of stocks are bound to fluctuate. Diversifying your investment portfolio can help you avoid this pitfall by spreading around your money to a number of stocks.
A well-diversified portfolio is important because in the event that one or more sectors of the economy start to decline, it will remain strong over time and reduce the likelihood of taking a significant hit as the market fluctuates.
Don't just diversify across the spectrum of asset classes. Some experts recommend you should also diversify your stock picks within each asset class represented in your portfolio.
3. Review your portfolio (but not too often). Anticipate that the market will fluctuate. If you check your stocks every day, you might end up feeling anxious over the value of your investments as things go up or down. But by the same token, you should check on your investments periodically.
Checking your portfolio at least once or twice a year is a good idea but research has shown that making rebalancing changes (selling the gains from those holdings which have been profitable and buying shares of those which have lost value) more than twice per year does not offer any benefit.
Some experts recommend checking on the quarterly earnings reports of a given company to see if your predictions for that company are holding true. Make changes as necessary, but don't jump ship every time a share reports a minor decrease in value.
Also important to keep in mind is tax implications of selling: if this is an account into which you've invested after-tax dollars (non-IRA or similar type of brokerage account), then try not to sell anything at a gain for at least one year in order to receive long-term capital gains rather than ordinary income tax treatment on your profits. For most people, the capital gains rate is more favorable than their income tax rate.

FAQ

Question : How do I create an imaginary portfolio ?
Answer : Follow these same steps without investing any money. Follow the progress of the stocks you chose.
Question : Where do I go to invest in marijuana stocks?
Answer : Ask a stockbroker who does business in an area where marijuana is legal.
Question : What does a gain or loss mean in a portfolio chart?
Answer : It refers to an increase or a decrease in the value of an investment.
Question : Which sector does better for next 3 years? In this sector, what are the names of the top 2 companies?
Answer : Anyone who tells you s/he knows what a given economic sector is going to do in the next three years is delusional. Your best bet is to invest in most or all sectors and in various companies with strong reputations.
Question : How do I calculate my returns in my diversified portfolio? And will my returns be lesser if I diversify my investments versus investing a lump sum in a single investment?
Answer : The easiest way to calculate total return on a diversified portfolio is to compare the total current value with the total value at the beginning of whatever period of time you're examining. If the value has risen, you would subtract the original value from the current value, then divide the difference by the original value. You would then multiply the quotient by 100 to get a percentage of return. Divide that percentage by the number of years you're considering to arrive at an annual percentage (which is the most commonly used percentage for the sake of comparison). Diversified portfolios often deliver better results than do single investments over a long period of time.
Question : How do I purchase stocks in South Africa?
Answer : Make online contact with any South African stockbroker registered to trade on the Johannesburg Stock Exchange. Ask if they do business with foreign investors.
Question : How do I open an account so that I can buy stocks?
Answer : Go to any local or online broker, fill out an application, and deposit some money.
Question : Will the initial money I deposit to open an account to buy or sell stocks be used toward buying or selling, or is it just the fee for opening the account?
Answer : Typically it is for buying stock. Brokers' terms may vary: some may remove part of your deposit to cover fees if you fail to pay them separately.

Tips.
Be aware of wash sale rules: if you decide to sell a stock or stock fund at a loss and buy into a stock or stock fund which is considered substantially similar within a 30-day period, you will not be able to claim that loss on your taxes.
Consult with a qualified financial planner if you're unsure of how to invest or what stocks are safe to invest in.
Be aware of tax consequences (see comments about long-term vs. short-term capital gains under "Maintaining your portfolio" above), and be aware that you will owe taxes on the dividends you earn on those stocks which pay them to you in the year they are earned, whether they were paid out to you or not.
Warnings.
Be aware that not all common stocks pay dividends. Whether a stock pays dividends should be only one factor in choosing it, not necessarily the only factor.

March 30, 2020

How to Find Investors for a Small Business

How to Find Investors for a Small Business.

If you want to start a small business or expand an existing one, then you’ll need to find money. One option is to bring on investors. There are many potential investors out there. However, you need to identify which ones will invest in your business and then put together a compelling presentation. When you meet with investors, remember to answer questions with confidence.

Part  1 Identifying Potential Investors.
1. Ask small business groups. You might not know where to begin. It’s probably best to start close to home. Meet with other small business owners or stop into your local Chamber of Commerce. Ask if they know of investors for your business.
2. Contact the Small Business Administration (SBA). In the U.S., the Small Business Investment Company (SBIC) program helps small businesses find investors. Over $21 billion of capital has been channeled through this program. Each SBIC is privately owned. However, they are licensed and regulated by the SBA.
You can find the SBIC directory here: https://www.sba.gov/sbic/financing-your-small-business/directory-sbic-licensees.
For purposes of the SBIC program, a small business generally has a net worth of less than $18 million and net income of $6 million or less. Furthermore, some business are prohibited from participating in the program.
3. Find a local incubator or accelerator. These organizations help start-ups turn their ideas into a real business, and they provide funding as well. You can find an incubator or accelerator near you by using the National Business Incubation Association’s directory listing.
Generally, incubators help start-ups or new businesses, while accelerators help already-established businesses grow faster.
Incubators might not provide investments directly. However, they can help connect you to potential investors.
4. Look at online crowdfunding. You can reach investors worldwide by using an online crowdfunding site, such as Equity.net. These websites give you access to hundreds of investors who can help you finalize your business plan and grow your business.
5. Remember family and friends. People who know you might invest in your business, especially since they can see your drive and determination. Remember to approach them as you would any other investor.
Friends and family will want some return on their investment, just like other investors. However, you might be more flexible in what you can offer. For example, instead of making them part-owners, you might want to provide them with free goods or services in return.
You also should think about asking people you know for a loan instead of for an investment. With a loan, you don’t have to give up any ownership in your business. Also, if your business fails, you can wipe out a loan in bankruptcy.
6. Hire a business capital broker. These brokers have networks of potential investors that they can contact. You can find a business capital broker online or by talking to other businesses that might have used a broker.
7. Consider if venture capital is right for you. Venture capital is a term used to describe a variety of investors, including private equity firms, venture capital firms, and angel investors. Although different, they share similarities.
They take big risks for potential big financial rewards. Accordingly, venture capital usually invests in industries with large growth potential, such as technology or biomedicine. Very few businesses qualify for venture capital financing.
They are actively involved in your business. For example, they will probably demand a seat on your board in exchange for investment capital. However, they often are experienced in your industry and can help you grow.
They have a longer investment horizon than other forms of financing.
8. Find venture capital investors. Look online at websites such as Angel Capital Association, Angel Investment Network, and Funded.com. Investors use these sites to find businesses to invest in.
The Angel Capital Association has a directory listing accredited investors. You can search by region or state. Links are provided so that you can visit the investor’s website to learn more about them.

Part 2 Putting Together a Presentation.
1. Run the numbers. You need to know how much money you’re after. If you need a small amount, you might only seek out one investor. However, if you need a lot of capital, then you’ll need to know that as well. Calculate how much money you need for your small business.
Also consider how much of your equity you are willing to give up in return. Investors don’t give loans. Instead, they take a share of ownership in exchange for money. You’ll need to come up with something reasonable.
For example, if your business is worth $100,000 and you want $25,000, then you’ll need to give up around 25% of the business’ equity.
2. Update your business plan. Your investors will want to see your business plan, which you should have already created if you are an existing business. The plan will identify your market, competitors, and include financial projections for five years.
Update the financial information so that it is current.
You should also bulk up the executive summary to your plan. Investors often will skip other parts but focus on the summary, so spend extra time on it.
Make the business plan colorful and include graphics so that the information is easy to digest.
3. Research the investor. You need to know whether a potential investor will be interested in your business. Many investors focus on only certain industries, so you’ll save yourself time if you figure out ahead of time their focus.
Look online to check what businesses they have invested in.
Look at their LinkedIn profile to see if you know people in common. If so, ask whether the investor might be interested in your business.
4. Ask for a meeting. There’s no one way to reach out to an investor. If someone recommended the investor to you, then mention the recommender’s name in your email or when you call. Alternately, you can send your email to the recommender, and they can then forward it on to the investor.
In the body of your email, clearly communicate what you do.
Mention the age of your business. Are you a start-up? Have you been in business for ten years?
Identify any other investors you have worked with. For example, an investor might have given you start-up funds five years ago.
Provide dates when you are willing to meet. Try to be as flexible as possible.
Proofread your email so that it looks professional.
Attach something to show the investor your business. For example, you might create a short video that shows your products or services.
5. Know your story. Investors aren’t only investing in a business. They are also investing in a person—you. Accordingly, they’ll want to know stuff about you. You need to be able to explain the following.
What about your background has led you to this point?
How have you benefited from your previous business experience. Be prepared to point to specific achievements.
6. Prepare for common questions. You can’t anticipate in advance everything a potential investor will ask you. However, there are some common questions you should think through.
What has been the biggest mistake you’ve made in your business?
How are your competitors outperforming you? Why?
Is anything working against your business, e.g., new regulations, demographic changes, etc.?
Why are you seeking funding?
What are your long-term growth plans? How do you intend to get there?
7. Get help from a Small Business Development Center. Your nearest SBDC can help you pull together a business plan, find potential investors, and prepare for meeting with investors. Contact the nearest SBDC and schedule an appointment.
You can find the nearest office here: https://www.sba.gov/tools/local-assistance/sbdc.

Part 3 Meeting with Potential Investors.
1. Make a memorable presentation. You’ll probably make a presentation to investors, which can take many forms. For example, you might make a PowerPoint presentation or create a booklet for the investor to flip through. With other investors, you’ll simply sit and talk. Whatever form your presentation takes, it’s important not to simply repeat the contents of your business plan.
Yes, the investor wants to understand your financials, which is why you have a business plan handy for them to take and read. However, it doesn’t hurt to get creative.
Show the investor your product or service. If you are expanding a pastry business, have an assortment of pastries with you. If you provide a service, then you can create a short video that shows your business in action. You need to give the investor a concrete idea of what your business does.
Remember that pictures are more memorable than words. If you create a PowerPoint, don’t fill it up with text.
2. Be brief. Your presentation shouldn’t take more than 20 minutes. If you use a PowerPoint, then it shouldn’t have more than 15 slides. Practice your presentation until you it is the right length.
3. Ask for advice at the first meeting. Don’t dive right in and ask for money. A potential investor needs time to mull over your business idea before they can decide whether they want to invest. Accordingly, you should spend the first meeting tapping the investor’s business knowledge.
However, you can subtly work money into the discussion. For example, you can say in an offhand manner, “I’ve been thinking I’d need $130,000 to open a new store in that location, but I’d like to hear from you if there are hidden costs you’ve found in your experience…”
4. Be honest. An investor won’t cut a check until they perform due diligence. They’ll want to take a closer look at your business financials, and they will uncover any misrepresentation you make. Always be honest in your business plan and in your conversations with potential investors.
Admit when you don’t know an answer. An investor will appreciate your honesty.
If you lie to one investor, then they will talk to others in their community. You’ll get a bad name and not be able to find any investors.
5. Project confidence. Potential investors want to see that you have faith in your business. Avoid being arrogant, which shows that you are insecure. Instead, project quiet confidence in the following ways:
Listen. Insecure people chatter all the time and laugh awkwardly to fill up silence. Be prepared to listen.
Stand up straight. Put your shoulders back when you sit and stand.
Make eye contact when talking and listening to someone.
Avoid fidgeting.
6. Remember to ask the investor questions. Any investor will take an ownership stake in your business. Accordingly, you’ll need to vet them as well. Ask the following questions before agreeing to work with someone.
What other projects are they investing in? Check whether or not they are similar to your business, or whether they are in different industries.
When was their last investment? If the investor hasn’t been investing in a while, they may not be serious.
How do they plan to increase your company’s value?
What factors will you consider before deciding to invest?
How active do they want to be in the business? Does the investor want a seat on the board, handle day-to-day operations, etc.?
7. Follow up with the investor. After a first meeting, thank the investor by sending them an email. It’s unlikely that they’ll agree to invest after only one meeting, so you want to keep the doors of communication open. A short, professional "thank you" email can do the trick.
You can also keep the investor updated on the progress of your business. For example, if you were rolling out a new product, let them know how it is going.
8. Stay professional if rejected. It’s hard to tell why people choose not to invest in businesses. You might not have been a right fit, or they might have already chosen to invest in a similar business. Regardless of the reason, you can control how you respond. Stay professional and thank them for their time.
Remember that you might run into the investor later down the road, when they are more willing to invest in you. There’s no reason to burn bridges right now.
9. Keep trying. Avoid being discouraged if you don’t get many offers, or if every presentation you give results in a rejection. You probably haven’t found the right investor yet. Keep searching, because the perfect investor may still be out there.

FAQ.

Question : How can I attract customers for my trading business?
Answer : Advertisement is key. Go to your local paper and ask them if they would run an article on your business, or just buy advertising within the paper. You can also start a social media group and add friends and family to help spread the word. Creating a website, or having one created for you, is also ideal. this will show possible investors that you are dedicated to this and will also give them a chance to see what would be in it for them.
Question : What are basic rules to follow when speaking to an investor?
Answer : You must possess and demonstrate the following characteristics: Professionalism, manners, wisdom, soundness, honesty, commitment, passion and determination.
Question : I'm looking for an investor for my restaurant. Where can I find more information?
Answer : Seek out colleges and universities that have master chef programs. You will find that the same people who are donating money to these schools come from within social circles that are also interested in helping to establish finer restaurateurs.
Question : How can I find an investor for an international school I want to establish in Ghana?
Answer : For an international school, you could try fundraising websites and create a social media group to help spread awareness. People will donate money to worthy causes, if they are aware of them.
Question : How do I find someone to invest in a business I want to purchase?
Answer : It depends on the type of business you are purchasing. Look for trade associations local to you area and find out if they have regular meetings you might attend.
Question : How can I find a business partner?
Answer : You can put the word out on social media or by handing out flyers at pertinent businesses. Offer perks for your business partners.
Question : How can I find a foreign investor to distribute products in Myanmar?
Answer : I would start with contacting the Myanmar Embassy in Washington, D.C. They should be able to assist with your questions concerning international trade, as well as help to put you in contact with the people who do the licensing for international trade and distribution of goods and services.

April 07, 2020