Question

Name and explain the five characteristics of investments

Answer 1

Five characteristics of investment are as follows-

A. Return- Return on investment is the most important characteristic of an investment because investors invest their money into various asset classes in order to earn a high rate of interest so the major motivation of all these investors are inclined towards making a high rate of return on their investments,so return is the major characteristics of any investment and it is the motivating factor for any investor.

B. Risk- Investment will have certain amount of risk as well, so and investor needs to know his risk taking ability and his overall loss taking tolerance in order to invest into the market, so investment cannot be completely safe and it is embedded with a certain level of risk so the risk and return are appropriately ascertained before investing into a particular asset.

C. Safety-investment should generally be safe in nature so that various investors can invest into those asset classes and they can have feel safe about their investments and they know that the mechanism is highly safe and their money would be safely invested.

D. Liquidity-investment should be highly liquid in nature and they should be realised as and when they are wanted by various investors so that there should be a high level of liquidity In those investments in order to liquidate them and realise the cash.

E. Legal-investments should be legal in nature because various investments are not allowed in various countries, like investment in Bitcoin is not allowed in many countries, so it can be said that investments should be legal and there should not be any legal implications on investing into those particular assets.