A successful investment meets its objective, can handle the risk and gives you returns.
“Courage taught me no matter how bad a crisis gets…. any sound investment will eventually pay off”- Carlos Helu.
Features of a good investment
Here are features you could look out for before jumping aboard one:
- Objective fulfillment-A good investment should fulfil the objectives of the investor. Check if the returns are gearing up to the overall expectation at the end of the period.
- Tax and Cost of investment– Tax plays a role when choosing an investment since it can reduce returns. It is important to factor in the fee for investing which may differ depending on the investment and the tax to be paid on the returns. The costs should be minimal so as to improve the quality of the investment objective.
- Safety– How safe is your capital? One should get the money injected into the investment. Loss of capital at the end of investment shows that the risks were not evaluated properly.
- Returns vs Risk- Do your returns on investment match the risk? A good investment tolerates the risk. High risk equals high returns and low risk equals low returns.
- Simple to review and manage– It should be easy to assess the performance of the investment. Here the investor may change the investment options to maximize returns.
- Growth potential and income– The potential for an investment can be short term or long term. The aim is there is potential for the investment to grow. However, if the investment doesn’t grow in value then it should generate income.
- A mix of investments– When funds are spread across the market, it balances the risk of loss of money. The investments perform differently in different markets.
- Liquidity- How easily can the investment be converted to cash? There are factors that may require you to liquidate your investment like a decrease in market value over a long period of time or for personal reasons. However, it is usually advisable to have an emergency fund to cater to personal needs. Long-term investments may lead to loss of funds if liquidated before the maturity date.
- Transparent – One should avoid investments that you cannot understand their performance in the market and the risks associated with them. Some investments are difficult to understand especially for a new investor. It is your money you’re investing hence you should know what you’re investing in.
- Is your investment protected? – Are there any regulations put in place to protect your investment? Some potential risks such as fraud or the collapse of a company are not supposed to affect the investors.
Conclusion
A good investment has to meet your financial objective, be risk-tolerant and offer the potential to grow. For you to get a good investment it is important to take time and evaluate your risk appetite. A good investment is the one that suits you most as it will direct your financial path towards more success.
Sources: Young Mogul, federaltimes, the balance, lehnerinvestments,
