Many overseas Filipinos invest with the hope of getting rich quickly but often fail to realize the risks involved. Investing without understanding can be dangerous. However, investing can also be a good way to grow your money over time if done correctly. Before you start investing, it’s important to do your research and understand the risks involved. Remember, knowledge is key when it comes to investing. The more you know, the better your chances of making wise decisions and achieving financial success.
In an exclusive interview with Financial Adviser and Author of the investment guidebook “PISO Master,” Lyndon Magsino, we tackled essential investment insights on making smart investments.
Magsino, known for his expertise in wealth creation and passive income strategies, emphasized the significance of due diligence in making informed investment decisions.
“Before diving into any investment opportunity, it’s crucial to conduct due diligence,” said Magsino. “Understanding the intricacies of due diligence can safeguard your hard-earned money and pave the way for long-term financial success.”
But what exactly is due diligence?
Understanding due diligence: The key to smart investments
Due diligence refers to the comprehensive assessment and investigation carried out by investors before committing to any financial venture. It involves scrutinizing various aspects of an investment opportunity to mitigate risks and maximize returns.
Here are the key components of due diligence as highlighted by Magsino:
- Demand on products: Evaluating the market demand for the products or services offered by the company. This involves analyzing sales volume and consumer trends to gauge potential profitability.
- Inherent Risks: Identifying and assessing the risks associated with the investment, including market volatility, regulatory changes, and operational challenges.
- Legalities: Ensuring the legitimacy and compliance of the company with regulatory authorities such as the SEC or local government agencies. This includes verifying licenses, permits, and regulatory filings.
- Information on Financials: Analyzing the financial performance and projections of the company to understand the potential return on investment. This involves assessing revenue streams, profitability ratios, and cash flow dynamics.
- Governance Team: Investigating the backgrounds and track records of the management team and board of directors. Trustworthiness, integrity, and past experiences play crucial roles in determining the credibility of the leadership.
- Economic Landscape & Strategy: Assessing the company’s strategic positioning and growth prospects in the context of the broader economic landscape. Understanding market trends, competitive dynamics, and expansion strategies is essential for informed decision-making.
- Nature of business: Gaining a thorough understanding of the industry and business model in which the investment operates. This includes assessing market dynamics, competitive advantages, and potential barriers to entry.
- Compliance with regulations: Ensuring compliance with industry-specific regulations and legal requirements. Non-compliance can lead to penalties, legal disputes, and reputational damage.
- Equity Valuation & Shareholding: Analyzing the valuation of equity and the structure of shareholding. Understanding the fair value of shares and the distribution of ownership rights is crucial for assessing investment potential.
By diligently conducting due diligence, investors can minimize risks, maximize returns, and make informed decisions that align with their financial goals. As Magsino aptly puts it, “Due diligence is not just a process—it’s a mindset that separates successful investors from those who gamble with their money.”
“Investing is not just about making money; it’s about preserving and growing your hard-earned income,” stresses Magsino.
“Remember, knowledge is power,” adds Magsino. By arming yourself with the right information and staying connected through platforms like www.ppie.ae and @ppieuae on social media, you can journey through your investment with confidence.
Mark your calendars for May 11-12, 2024, and head to the Bristol Hotel, Deira, Dubai, for the 10th edition of the largest investment exhibition for Filipinos in the Middle East, the Philippine Property and Investment Exhibition (PPIE). Join industry experts and fellow OFWs to gain invaluable insights into safeguarding your investments.
With diligence and informed decision-making, you can secure your investments and build a prosperous future as an OFW.
