Question

Ways of determine investment decision in investment planning

Answer 1

Way to determine investment decision in investment planning is as follows :

1. Determine your requirements:

Follow the way that helps you achieve your short-term and long-term goals. This can include funding the education for your children, or investing in your business for expansion, retirement or travel plans, etc. You can directly address your requirements by identifying these goals with your investment.

2. Risk Tolerance:

How much risk can you tolerate ? Thus, understanding the risk factor is the major key for choosing an investment scheme. The risk tolerance differ for every investor, being a personal characteristic.Our age and the emotional make-up, also largely impact our ability to tolerate risks. Risk tolerance levels may differ for every part of portfolio.

3. Income Level:

absolute income level as well as return requirements, can largely effect your decisions relating to investment. Our income can also influence our risk preferences. Investors with higher income may be more inclined towards riskier strategies, as they can conveniently contribute to added investment capital at the time they face any losses.

4. Tax Liability:

tax or any special tax circumstances are a few considerations that helps us determine ways to seek the maximum utilization from your tax-benefiting investment schemes.

5. Total Wealth:

Our investment objectives should also consider the assets outside our portfolio. The value of a person’s expected pension, or his other retirement benefits may influence the return objectives and risk tolerance of his investment portfolio.

Moreover, our wealth levels can also impact the way we live (our lifestyle). A desired standard of living determines our risk tolerance factor, and should be considered with your investment objectives.

6. Investment Time Horizon:

This may require us to ask questions such as:

• When do we plan to draw the assets in your portfolio?
• Do we prefer to choose short or long term maturity assets?
• Do we have enough time for recovering from a descending market?
• How important is capital preservation, for meeting an urgent financial need?

7. Liquidity Payment:

This is about the ease with which we can transform our assets into cash, at or near to the latest fair market value.This may require us to ask questions such as: do we need an investment portfolio to liquidate easily, or can we wait some more?Liquid assets comprise of cash at hand, cash at bank, fixed deposits and liquid funds

Once our investment provides you the answers to all these questions, we surely succeed in achieving all its objectives of decision made for investment planning

hope this helps!!