There are always factors to consider when making decisions. Investment is no exception. Many factors should be considered by investors before investing. Some factors will emanate from the investor and others from external environs. Nevertheless, in this article, I will be talking about the factors that make up the individual investor that can also affect your decision to invest. Knowing yourself as an investor by experience and professional practice has enlightened me to understand why people lose their funds after making profit a sole factor for investing. Knowing yourself is an element any investor should not neglect anytime when it comes to investing. When I talk about knowing yourself, I mean becoming aware of your likes and dislikes about investments. Let’s go straight to some points you need to consider in relation to knowing yourself.
Investment goal or objective
Many investors think of having interest on their principal as the main goal of investing. This is not a bad idea when it comes to investing. The truth about investment is that basically, you either make profit or loss depending on the nature of investment you may engage yourself in. You cannot make the fish walk in water while it is supposed to swim in it. It is the nature of the fish to swim when it’s in water. Like an investment, all investment will either make profit or loss. Now the question to ask is how then can I set an objective for my investment. Goals are set as a result of needs and wants. What do you want or need? Do you want a car? Do you want to fund your child’s education? Do you want to plan for retirement? Or you want to create wealth? These are questions that lead to setting up your own objective for the investment you want to do.
Risk Profile
When we talk about risk in investment we are looking at the probability or how likely you can lose your money or the value of the money. Every investment has a risk attached to it. Interestingly the interest rate always corresponds with the risk involved. The investor should be able to tell how ready he or she is to take the interest rate and its corresponding risk. What amount of risk can you take as an investor? Will you be ok if you lose little, great portion or all your funds? Young people who have started working and want to start investing can take the risk of investing in stocks for a purported long-term investment. In doing that the fluctuations will be catered for in the long term and a substantial profit will be made. Example of the fluctuation is when “GSE-CI increased 24.82 points or 0.78% to 3192 on Friday, June 1, 2018. from 3167 in the previous trading session. Historically, the Ghana Stock Market Composite Index (GSE-CI) reached an all-time high of 3489.21 in April 2018 and a record low of 940.04 in December of 2011″(tradingeconomics.com). So if you had invested from 2011 till know you would have made a substantial return. On the other hand, adults who are nearing retirement would rather go in for a short term-money market or fixed income investment or may adjust his long-term investment to fit his current situation. This is so because they may not have enough time to recoup the huge losses.
Investment period
Investment period connotes the holding period of your investment. Every investor has a choice to decide the number of days, month or years of his or her investment. Most of the times investors prefer short-term investments(less than a year). But investing for the longer term can be very beneficial to the investor and even to his generation. As an investor, you have the choice of choosing the holding period for your investment with regards to the type of investment vehicle. Investment advisors will or can advise on the holding period depending on the information (KYC-Know Your Client) that will be given. Don’t just choose or decide on the holding period for your investment but rather choose a holding period with your investment goal and investment advice in perspective. Most short-term investments are good for safety or preservation and income generation of capital. For long-term, the growth of capital is more preferable. In other words, if you want to create wealth, long-term investment will be the appropriate option.
What do you know?
Your lack of knowledge as an investor may lead to a loss of some percentage or all of your capital. Investors should always try to know more about the type of investment they are doing. It is always profitable to know more about your kind of investment. Knowledge causes growth in all facets of life. Thus it is very key for an investor to have knowledge on his investment periodically. You must also know the people or experts behind the investment. Know the caliber of managers handling your money. Know where your money is being invested. Know the performance of your investment (year-to-date or annualized yield). Get knowledge on the financials of the fund.
Understand what you don’t understand
Many investors don’t understand how a number of investments work. All they know is the percentage of return they will get at the end of the holding period. If you have an understanding of something it saves you from any hidden secret. A good way of understanding your kind of fund is through questions. Ask your investment advisor or relationship manager questions that border your mind. You will be surprised to know the amount corporate firms pay for such services. But with individuals it is free and part of the services after investing with a fund manager. I urge investors to ask all necessary and appropriate questions that will lead to the knowledge of the investment. This is because you must understand what you are doing and feel comfortable doing it, not just because you were talked into doing it.
source: moneyread.org