- January 26, 2022
- Posted by: admin
- Category: Investment
Investment option: Once, Robert G. Allen, writer and one of the most sought-after financial advisors, asked a question that goes thus “How many millionaires do you know who have become wealthy by investing in savings accounts?” Once you have thought critically about this question, you find out that the only is “no!” No millionaire in global history made their millions from simply saving up their salary or profits. Instead, they invested despite the risks and increased their wealth.
If you want to be a millionaire too or become financially comfortable, you might want to consider investing. Most people often decide against investing because of the risks involved, and saving becomes the easier route. Yes! Savings are excellent, but the gains are usually small because of the meager interest rates. Hence, investment is the best option to make more with minimal effort and enough funds.
To get started, you have to put aside your fear of losses and embrace the fact that risks are an integral part of an investment. There are several investment options, but before you choose, there are some factors you need to consider. Some of those factors are discussed below.
The Return on Investments (ROI)
The principal aim of investing is to gain profits, and that is why the interest rates must be considered first. The ROI is the returns investors get after subtracting the investment cost. ROI comes in different flavours. It could be in the form of interests, dividends, or an increase in the value of assets. No matter the form it comes in, it should satisfy your investment goals.
Risks involved in investments usually result in losses, but sometimes they are worth it. The investment options that yield the highest returns have the most chances. For example, stocks, cryptocurrencies, and mutual funds pay higher returns than the fixed deposit or high-yield savings accounts with minimal risks.
Investment timeline – investment option
The investment timeline can either be long, medium, or short. The length of the timeline affects the value of your Return on Investments (ROI). Long-term investments usually yield higher returns than short-term investments, and that is why they are generally considered the best options. In the end, it all depends on your risk tolerance level.
Liquidity is referred to the ease with which an investment can be converted to cash. Cash is considered a liquid asset because of its ease of access and use. When choosing an investment option, ensure that you select an option that can be easily converted to cash in case of emergencies. Not all investments are liquids, and a perfect example is a real estate. However, Stocks, bonds, cryptocurrency, money market assets, and ETFs are liquid.,
Tax is a compulsory paid to the government by the citizens of a country. The investment option with the highest tax deductibles is real estate, fixed deposit, and high-yield savings. Different investments have a tax rate attached to them. Hence, you must consider the tax rates to receive a high after-tax return.
Inflation rate and volatility
Inflation and volatility are trendy terms in the investment industry. Inflation is the gross increase in the prices of goods and services, which leads to a steady decline in the purchasing value of currencies. Every year, the inflation rate is calculated to ascertain the increase in the economy’s average prices of goods and services. If the inflation rate increases, the value of money drops, which might affect the magnitude of your Return on Investments (ROI). A good investment should have a higher ROI than the inflation rate. While some investment options are negatively affected by high inflation rates, others are positively impacted.
Volatility is the rise and fall in market prices. Some investments go through frequent fluctuations, and they are referred to as highly volatile. Highly volatile investment options are stocks and cryptocurrencies. Before investing in a volatile investment option, you must first consider your risk level. Most investors still invest in highly volatile ventures because the returns are usually robust.
Before selecting an investment option, consider the factors discussed above to get a holistic view of the option. You wouldn’t want to be shocked at the outcomes of the investments after investing. These factors prepare you for all the risks and joys of your preferred investment option. Never invest in a venture you don’t understand, always do your research. If you are still confused after researching, you can seek help from financial experts.