We have heard of Investors and investments many times but never got it through what these terms mean. Investors are those individuals who put money to investments for a bigger return with minimum risk and maximum profit. Investments can sometimes be risky. Thus the investors need to be very careful before investing their time and money to something. There are various varieties in which investments can be done according to one’s interest, but some factors for choosing what, in which and how much to invest are very crucial to keep in mind.
The two most important factors influencing investors preferences are:
As the number of investors is growing in the stock market, so are the frauds and bluffs in the market. There is a high risk of investing in an unreliable investment or a fraud company if certain things about the investments are not taken care of. The risk may be defined as the chance of getting push-back due to uncertainty in profits and returns. Investors face risk until they place their funds in banks.
Risk is further of two types-systematic risk and asset-driven risk. Systematic risk as the name suggests is the risk based on monetary grounds. Issues such as economic crisis, uprising taxes or change in interest rates fall under this category.
Another type is the asset-driven risk. It is non-monetary and is based on loss of the certain type of asset like the product unable to cope up with the latest trends, rise in competition in the market, etc. it may also be due to encountering some issues like labor strike, poor management decisions, etc.
It is a major factor why an individual may decide to invest in some possession. Investment return may be defined as the percentage change in the investment value over a given period of time. The higher the return, the more is the profit to the investor. On the other hand, a very high return may also because of greater investment risk. The profit may be in the form of increased income, bonus, etc.
Hence, these two factors play the most crucial role in an investor’s preference which should be taken care the most!