Thursday, April 1, 2010

Precaution step taken before investment----

Investment is a risky work if you want to get high return than definitely you need to ready for high risk, lower the risk lower gain, but some precaution will reduce risk or minimize the risk.
First you need to understand why investment is required.
Suppose you have $10000 today but the purchasing power of $10000 is reducing with the time .Investment help to maintain the marginal value of money.
Second you have a requirement $50000 after 10 years and you save from today to get this amount .In every year you need to reserve $5000 to get the amount $50000 after 10 years ,or you need to deposit a certain amount today in any bank to get the
$50000 after 10 years, in any one this condition you are not benefitted by the market change, or $5000 every year not help your money to get extra advantage ,on the other hand if you invest $5000 every year in any investment plan which is quite necessary that as liquid that ,you easily converted that investment in liquid cash than you are getting extra benefit from your saving .suppose I purchase $5000 share of a company every year and after 10th year when I need the liquid cash than I sell the whole share in that time and the whole investment arise near about $ 70000 that means I get $20000 extra.
Again the investment depend on the basis or requirement suppose You need cash money or need equivalent amount to pay to any other after a long period of time .
Suppose you need liquid cash on maturity than you definitely go with the option when the liquid cash easily available after maturity like debt bonds investment.
Debt bonds issued by the Govt. or any other financial institution to collect money.
This amount converted into cash after maturity, here the interest rate is also high compare to normal market but the risk factor is also high.
I will never advice anyone to invest his total reserve in any single investment plan .First I suggest That if you have a surplus amount of reserve than you go with the investment plan, you never go to invest your total income in the investment plan if do to any reason market down than you lost your total amount at one time.’

Steps that need to monitor before investment:

1. Risk taking ability: First you need to decide how much financially strong you are, if you are financially strong than surely your risk taking ability higher than other.
This ability varies with age group with reserve amount with market condition.
People from 30to40 age groups are risk averse they not ready than the 40 + people.
Market ups and down will also affect the investment plan if market continues upward trend than surely the investment increase in the market, and vice versa in opposite Condition .
2.Interest rate :Interest rate in the market change the investment, suppose if the interest rate high than the investment reduce ,people choose to deposit the amount and get the interest on the deposit amount, but if the interest rate low than investment increase in the market.
3. Past trend: Past financial result of any company would help to collect money suppose the company show good financial result in the past definitely, investore go for that company for investment, but as per my point of view I will never recommend anyone to invest based on the past record.

4. Economic policy of the country: Open market economy will attract the investor, on the other hand autocratic or the socialist plan distracts the investment.

5. Future plan: Future prospect of any company is help to understand the future trend and help to make the future projection for that company .I will recommend anyone to select the investment plan as per the future prospect, which help to know the actual financial position of the company in future.

5. Liquidity position: If you want to invest in any plan first need to decide the liquidity position because if the company does have adequate amount of liquid cash than might be possible you loss your money.

6. Time period of investment: Never ever make any decision of investment or disinvestment by regular changing situation of market always go for long term investment plan which help to get better return.

7. Portfolio investment system: Never put your eggs in single basket, mean to say never invest in any single company of the investment plan .Invest indifferent sector of investment which helps to reduce the financial risk.

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