Question

What criteria would you use to make personal investment decisions? How are those criteria similar to and different from the criteria used by businesses to make investment decisions?

Answer 1

Investment criteria used before making personal investment decision s:

• Before making an investment decision systematic evaluation of the financial situation is very important.
• Systematic evaluation of Risk appetite is also a major factor while making an investment decision
• On the basis of diversification of funds on should maintain an emergency fund
• One should also consider the dollar cost averaging and sponsored retirement plans before making an investment decision
• After making an investment decision also one should be aware of scams and occasionally rebalance the portfolio.

Investment criteria used before making Business investment decisions:

• In business, Investment should be considered as an ongoing strategy and a proper evaluation should be done before making a decision
• Before making a business investment decision firm should prioritise its current debts
• A firm should have to maintain an emergency fund before making an investment decision
• Investment in the workforce should be considered before making an investment decision

These are few criteria for both personal and business before making an investment decision. In both, the cases return on investment plays a vital role. and if you go through above-mentioned criteria for individual and business, more or less they are same. The only difference is in the level of analysis and risk factor.