4 most important factors determining investment choices
Investment is a domain that can help you expand your knowledge in the horizon of finance. The typical investment world started with traditional means like gold and real estate, but now we have expanded to invest in other investment options like commodities, funds, bonds, equity, to name a few. The investment world is full of options and each option has its own benefits and returns. But how do we decide if a particular investment is good or bad? What influences our investment choices? Let’s see.
Investment goals is the biggest influencer of our investment choice. Goals can be short term or long term, depending on the desired return. As per your goals, you can sit and list out all the investment options available to you and then make an investment decision.
Amount of investment
Every investment option requires a different amount of capital. The amount of capital you have to invest is one of the biggest influencers of your investment choices. If you hive a large sum of money, you might think of investing in commodities or real estate, but if you are planning to invest with a moderate or low capital, stocks can be a good option for you.
There is a lot of risk and anxiety that comes along with an investment. So deciding on the amount of risk that you can take, is an important factor in deciding your investment options. It is established the higher the risk involved, the higher will be the return on investment. Some people might even choose to take lower-risk investment and agree to the lower return. Some investment options for high-risk takers involve equity, while for low-risk takers, real estate and fixed deposit can be a good option.
In a domain such highly dominated by risks, emotions influence decisions a lot. Emotions change with each risk and thus, it is important to keep emotions in check. For say, the stock market is a marketplace where bulls and bears are constantly changing. Thus, emotions keep changing with every change, making it difficult for people to decide whether to hold or encash stocks.
Other than these four factors, there are a lot of other factors that affect decision making power for an investor. Some of these factors are the duration of the investment, income, need for liquidity, tax liability, etc. keeping these factors in mind, it is advised that investors create a strategy that helps them build a better portfolio and increase the chances of an optimal return.