Planning Investments? Here Are 6 Useful Tricks On How To Gain Maximum From Them.

An investment is an asset acquired with the intention of future appreciation. Activities associated with financial investment include real estate investment, purchasing bonds, stock acquisition, etc. An investment can be autonomous or induced in nature. Whereas the induced investment depends on income, autonomous investment is dependent on an exogenous function like population growth. Investment can be made by private members in the economy (private investment) or by the government and another public enterprise (public investment).

The benefit that comes from the investment is known as a return. In finance, the return comes in the form of a capital gain, share dividend, interest on bonds or even income. To project expected future benefit for investment, financial accountants use the projected amount in the valuation. Some of the determinants of investments include interest rates, internal rate of return, expected future flow of income, the initial cost of capital and the degree of certainty.

Before an investor makes a decision on whether to focus on a given portfolio, they need to take cognizance of certain factors.


Below are six useful tricks when planning for investment


1. Live below your means


For you to invest, you need to develop the practice of consuming less and saving more. This, however, does not mean one to cut off essential services. One principle of saving a lot is by buying less.


2. Take note of the cost


Quite often people are quick to point out a return when the topic of investment is brought up. However, the cost is an essential part of this process. In fact, it is the most important aspect of the process. Below is a graphical illustration of the effects cost bring in the performance of an investment


An investor takes note of the fund expense ratio, turn over and load fee. These three factors need to be below average


3. Market diversification


Buying the market help an investor to hedge against risk or return and diversify their portfolio of investment. This process also helps an investor stand at a better position once mutual fund fees are settled.


4. Avoid market timing


The security markets are free ones and are only affluence by market forces of demand and supply. Therefore, there is no defining pattern that the market assumes at any given time. However, the determinants for investment like the interest rate can be manipulated bringing about a systemic pattern. Investors, therefore, begin to speculate on how the change in interest rate will lower or increase the prices of the security. Therefore, there is a kind in and out movement

While they may find it right bailing out, they will have to be forced to find it right again before getting in, and this is not easy.

Lindauer cautions investors against the attempt to tame the market.

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5. Invest in a business you understand


The saying “not everything that glitters is gold”, is applicable to financial decisions especially when investing. Some may be the reflection of a rare mirror on a shiny surface. Investors should not get into a business because a friend is in the same, or because they have heard an advertisement. Try something you are aware of and preparation of the risks. This calls for planning and setting goals. Well laid out goals will prevent persuasion and influence from the environment

Buckley states that

It is important to understand what you are dealing with. Investors are therefore advised to do proper research to know the kind of business they are entering in.


6. Avoid using past returns as benchmarks


Tim Buckley caution investors on using previous security performance for predicting the current market. This is common in the buy high sell low trap that investors fall for. Usually, when interest rates are high (low prices), investors rush to purchase securities. They predict that the interest rates will fall soon, and therefore they will be able to sell their securities at higher prices, enjoying profits. Now things turn south when the prices continue to fall below the buying price. For fear of greater loss, they are forced to sell out.

Investors should, therefore, avoid being driven by promise and speculation. Instead, they should treat each trading period separate to avoid crumble in the market.


Conclusion


Investing is not a one-day event, but a well thought out and implemented action. It not only requires being rational but being both goal and market-oriented. You must take into considerations all factors including the costs, returns and the opportunity cost involved. Always be on the lookup for new opportunities and be in a position of foreseeing eventualities that might occur in the nearby future. With these simple facts in mind, you can be assured of successful investments. Take your chance today and invest wisely!

 

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