Investment Decision Process: Things to Consider Before Making an Investment Decision

Investment Decision Process: Things to Consider Before Making an Investment Decision

Investment Decision Process

Here are few questions that may seem to bother you before making an investment decision- How does the investment work? What are your goals that you want to achieve through this investment? What are the risks of making an investment? How much do you expect to earn on the investment? How long do you plan to invest? What is the best investment decision? What are the costs to buy, hold and sell the investment? We have got answer for your each question related to making a smart investment that will provide you best of Return On Investment (ROI).

But before that lets once get familiar with the definition of the term “Investment”. Wikipedia reads the definition of investment as “In general, to invest is to allocate money in the expectation of some benefit in the future”. Investing is multiplying your money to double triple and even more at a rate that is faster than putting it in a savings account.  It is a way of saving your money for something further ahead in the future. Although investing carries risks for your money, it will potentially give you a much higher return.

Types of Investment Decisions

Importance of investment decision making is well known to everyone of us. So now its time to look at the Investment decision process and types of investment decisions. The type of investment decision may vary from one person to another. Let’s now look at various types of investment decisions.

1. Knowing the risks involved in the investment plan

Investment Plans are financial products that provide the opportunity to create wealth for future. But at the same time it is involve risk taking and scope of losses. So it’s always recommended to know the risk involved while making an investment decision. This help you to make a better judgment and a better business decision.

2. Try not to focus on risk

Since we already know that the risk is involved in every field of life. As if now nothing is certain therefore it’s important to overcome the hesitant nature and try to take calculative risk in life specially while making business decision. As we already know the importance of investment decision we must also know that greater the risks greater are the chances to for good returns. Hence we must strongly suggest you try not to focus on risks.

3. Analyzing key business decisions by Capital budgeting

Let us first get familiar with the term Capital budgeting. Capital budgeting is the process of deciding whether to undertake an investment project or not. It is a mechanism in which a business determines and evaluates potential large expenses or investments. These expenditures and investments include projects such as building a new plant or investing in a long-term venture. Capital budgeting hence play important role in business decision making.

Things to Consider Before Making an Investment Decision

Investing in stock is the perfect blend of deep research and analysis. It requires ready to lose kinda of attitude and of course a good luck. For smart investing, you don’t need a thorough knowledge of all those concepts of investments and stock market but only the minimal knowledge of smart investment that you will soon be familiar with. So here I am going to explain you some basic things that you must consider before making an investment. Also we will discuss about the best ways to invest your savings and where to invest money for good returns. Then let’s start. These are the most important and the prime factors in Investment decision process that will determine when, where and how  you are gonna invest

Now let us take a detailed look on each of these factors one by one.

Investment objective:

Before making any investment it’s so very important to that you calmly analyse your financial situation and draw a financial road map of your own. Now being clear with you financial situation it is essential to determine your investment objective. If your goals are simply to keep your saving safe then you must go for investment options like fixed deposits.  Investments in mostly bonds are also suitable here. But if you aim to make higher profits then prepare your mindset for some risks tolerance. All these different kind of investment objectives or goals are compatible with different kinds of investments or mix of investments that we had discussed earlier. So once you know your investment objective we can move forward toward the other considerable factors for investment decision making.

The time to make investment:

The most essential and crucial factor of the smart investment is the time.This is one of the most important things you should consider before investing. There is indeed right time to make a right investment. I can’t really provide with some pro formula to decide that the time to make investment is right or not because there don’t exist one. All you need here is the power of an observant eye to discover the right time to make the best return on investment for yourself. For this particular consideration you may even choose to consult a financial adviser. Also employing someone with good judgment and knowledge of investment marketing with help you know better about the right time and place for investing.

Apart from the right time, in general people also consider  your AGE as a deciding factor. They says when it comes to investing, being young is an advantage. This is because you have more disposable income, not many responsibilities and a higher risk taking ability. All these points make your age a considerable factor for investment decision. Nevertheless, I don’t consider age as an instrument to drive a successful investment.

Where to make investment: investment decision making

where to invest money for good returns can be decided earlier itself on the basis of your investment objective. Going for the options such as fixed deposits and bonds may keep you investment safe but not result in higher appreciation. Where as investing your money in stocks marketing may involves higher returns but additional aggressive risks also. People usually makes mistakes of investing in a venture they have little knowledge about it. Or people take decisions based on the fact that they know someone who is getting good results in such or because of its popularity. In any case these assumptions may not work all time because the assumptions are different from reality.

Though, it’s always advisable to go for moderate risks options especially at the beginning. These may include places like real estate or a stable company that pay out dividends. However, while planning to invest in any financial product it’s so very important to understand these products before adding them to your portfolio. Knowing the intricacies of the products will ensure that they not only meet your needs, but also provide higher profitability.

The duration of investment:

The time before you need the money or the duration of investment decision making is directly proportional to the length of investment goals; short-investment or long-term. This completely depend upon you. The long term investment lead to higher profits but unfortunately to higher risks and potential losses which you may or may not be able to recover. But this is certainly uncertain to tell you now which one to go for. For say if you don’t have enough time to stay invested then it’s always preferable to go for short term risk free investment like bonds. However, if you are ready for long term investment please be ready to take some risk so that they could return you some potential return on investments.

Risk Tolerance:

Well it’s pretty obvious that all the investments hold some sort of risk. Therefore it is really a important factor to pay heat before making investment decision. The general rule is the higher the risk of an investment, the more potential there is for higher return. However, it’s not true in every case. Not everyone can tolerate risk or take risks with their money over to greater extent. Hence knowing the risks involved in investment plans is must for every investor. People usually makes mistakes of investing in a venture they have little knowledge about it considering it a risk but the story is entirely different in this case. Before investing in to something you need to be careful about all the possible risks and understand all possible. It’s better to consult a financial advisory when making decisions. You can check our services and team to help yourself out.

Analyzing these all factors before making an investment will help you determine which instruments are a good fit for your age, financial condition, risk profile, time duration and goals. We hope that you make a successful investment decision that helps you to gain high profits. For any help or consultancy please feel free to contact our services and team.

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