We have heard the Investors and investments plenty of times but never got it v what this terms mean. Investors are those people who placed money come investments because that a enlarge return with minimum risk and also maximum profit. Investments can sometimes it is in risky. Therefore the investors must be very careful prior to investing their time and also money to something. There are assorted varieties in i m sorry investments can be excellent according come one’s interest, but some factors for choosing what, in which and how much to invest room very critical to save in mind.
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The two many important determinants influencing investors choices are:
RiskAs the variety of investors is farming in the share market, so room the frauds and bluffs in the market. There is a high hazard of investing in one unreliable investment or a fraud company if specific things about the investments space not taken treatment of. The risk might be characterized as the possibility of gaining push-back as result of uncertainty in profits and also returns. Investors face risk until they place their accumulation in banks.
Risk is further of 2 types-systematic risk and also asset-driven risk. Methodical risk as the name says is the risk based on monetary grounds. Concerns such as economic crisis, uprising count or change in attention rates fall under this category.
Another type is the asset-driven risk. That is non-monetary and is based on loss the the certain form of asset favor the product can not to cope up v the recent trends, climb in competition in the market, etc. The may additionally be as result of encountering some concerns like labor strike, negative management decisions, etc.
ReturnIt is a major factor why an individual may decide to invest in some possession. Invest return might be identified as the percentage adjust in the investment value over a given period of time. The higher the return, the an ext is the profit to the investor. Top top the various other hand, a an extremely high return may additionally because of greater investment risk. The profit may be in the type of boosted income, bonus, etc.
Hence, these two components play the most critical role in one investor’s preference which have to be taken treatment the most!
RiskAs the variety of investors is growing in the share market, so room the frauds and also bluffs in the market. Over there is a high risk of investing in an unreliable invest or a fraud firm if certain things about the investments are not taken care of. The risk might be identified as the possibility of obtaining push-back due to uncertainty in profits and returns. Investors face risk until they location their accumulation in banks.
Risk is more of two types-systematic risk and also asset-driven risk. Organized risk as the name suggests is the risk based upon monetary grounds. Problems such as financial crisis, uprising counting or change in attention rates fall under this category.
Another type is the asset-driven risk. That is non-monetary and is based on loss the the certain form of asset prefer the product unable to cope up with the latest trends, rise in competition in the market, etc. The may likewise be due to encountering some worries like job strike, poor management decisions, etc.
ReturnIt is a major factor why an individual may decide come invest in some possession. Investment return may be identified as the percentage readjust in the investment value over a given duration of time. The higher the return, the an ext is the benefit to the investor. ~ above the various other hand, a very high return may likewise because of better investment risk. The profit may be in the form of boosted income, bonus, etc.
Hence, these two factors play the most vital role in one investor’s choice which need to be taken treatment the most!" target="_blank">
DR NAVEEN PRASADULAMSC(I.T),MBA,PHD follow
Best usage for your money. The most crucial factor to take into consideration if it is the right time for you come invest is to look at the best use of your money.Your objective for investing. A variable that determines whereby to invest your money is your objective for investing.YourAge.Time prior to you require the money.Risktolerance.
1. Best use for her money
The most crucial factor to take into consideration if the isthe appropriate time because that you come investis to look in ~ the ideal use of her money.
For example, i will not ~ it make much more sense to pay her debt? The money you are spending on the attention of your high credit card debt may be higher than what you could earn once you invest. For example it renders sense come pay off that credit card debt that is costing friend 20% every year, prior to investing ~ above mutual fund or stocks wherein you realistically intend to earn 10% or less.
Also an ext important, friend should protect yourself indigenous the financial disasters that can wipe the end all her investments, or worse, put you right into a huge burden of debt when they happen. This can be done by purchase insurance before investing.
First that all, make sure that you have actually adequate health insurance, to safeguard your money versus the high price of gift treated for wellness problems. A disability insurance is additionally a an excellent idea because a handicap can wipe out your savings really fast.
2. Her objective because that investing
A aspect that determineswhere to investyour money is your objective for investing.
You may want to hopefully grow your money fast and also you execute not treatment if you threat it since you have an ext time to pick yourself up and recover from a downturn. Or your goal is just to maintain your funding in the safest method because girlfriend will need your money soon, and also it is essential that that does not shed its value.
These different goals room compatible with different kinds of invest or mix the investments, together follows:Keeping her money relatively safe because you need it soon– if you space close to retirement, you would certainly not want your money to decrease in value simply when girlfriend are around to retire. Thus if you have actually a financial goal that is near, investing in much less risky instruments makes sense. Invest in mainly bonds are suitable here. Bonds space safe instruments.Taking moderate risk with your money for far better appreciation– if you deserve to afford to take it a tiny risk through your money due to the fact that you will not require it soon, then buying one investment like a mix of stocks of very stable companies that pays out dividend (income) and stocks of agency that execute not pay the end dividend yet reinvest its revenue in the future is a great choice because that you.Taking aggressive dangers for greater gains– if you deserve to afford to take a hazard with your money for higher gains, then growth should be your goal. You have to invest in stocks of companies that plow its earning s back into that is future. This is suitable if you have the right to keep your invest for a long duration of time due to the fact that it bring away time because that some companies to do its value rise sizably.
It is also feasible that you deserve to invest because that two different goals, such as investing because that a home down payment (short term), and also investing come retire (long term).
3. Your Age
A element you should consider to determinewhere to put your investment and also how much to investis her age.
In investing, being young has actually an advantage. You space able come wait a much longer time for your invest to be affected by each other fruit. While young, you room also more secure, you do not have actually a many responsibilities, girlfriend have more disposable income, and you have the right to pick you yourself up easier when you do mistakes. Therefore, once you are young, friend can obtain into investments that room riskier however can potentially earn above average earnings.
Another benefit of gift young is that you have more time for compound interest to work for you. Compound interest is earning attention on your interests and also principal, and also this renders your money grow at a faster rate end time.
If you space young, that is not really important to put in a most money for investment if girlfriend have really long term goal such as retirement.
On the other extreme, if you are center aged and also thinking around retirement, yet you space just starting to save for retirement, you should invest the maximum quantity you can afford therefore you have the right to live comfortably as soon as you retire. Friend should additionally put her money in a fairly safe investment, so there is very small risk of losing much of that by the moment you retire.
Since stocks are fairly riskier investments 보다 bonds, a formula you can follow to determine just how much percent of stocks you should hold (vs. Bonds and other safer instruments) is 120 minus her age.
4. Time prior to you require the money.
Not everyone invests come retire, part investments have shorter goals. Therefore, an additional factor you should think about to determinewhere to investis the time you have before turning your investment into cash.
The much longer you have the right to stay invested, the an ext you have the right to take hazard (and hopefully get much more gain) due to the fact that you deserve to still recuperate from any type of potential loss. If you perform not have actually a many time and taking a loss would be disastrous to her plan, climate it is ideal to stick to much less risky investments choose bonds.Also think about that part investments will cost you dues or penalties if surrendered or redeemed prior to a hold period. If this is a requirement, make sure that you do not require the money before the prescribed redemption period.
You should additionally consider the tax effects of withdrawing your investment.
5. Danger tolerance
As a basic rule, the greater the hazard of an investment, the an ext potential for higher return.
However, not everyone can take dangers with your money over a details level. Not everyone is comfortable with the ups and downs the the share market, for example. You might be therefore averse come risking her money that a potential greater rate the return may not be precious the stress and also your shedding sleep.
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If your personality is one who have the right to accept losing money for the possibility of obtaining much much more profit on her investment, choose aggressive investments together as development stocks.