Golden Rules of Investment

Following are the golden rules of investment:

  • Savings should be started as soon as one starts earning.
  • investing of surplus funds must be done immediately
  • Investment should be made at regular intervals of time.
  • Investment should be for long term.
  • Never put all eggs in one basket (Diversification)
  • Have a good plan
  • Start with something small
  • Determine your acceptable risk
  • Keep it simple
  • Never invest money that one cannot afford to lose
  • Focus on value, not price.

Investment Consideration

When one is considering an investment plan, careful consideration needs to be given to the following:

  1. Investment goals
  2. Time available for working with investments
  3. Knowledge of different investment avenues
  4. Funds available for investing
  5. Risk tolerance ability to bear the risk involved in the investment
  6. Present financial situation

The basic objective of investing is to minimize the risk and maximize the return on investment.

 

However, investing involves risk also. For example, in case of investment in shares, earnings are not generally guaranteed and one may lose some part of his invested amount as well. Before one goas for investments, the following general financial situation should be kept under in mind:

  1. An emergency requirement of funds
  2. Some savings for short term requirements
  3. Adequate insurance coverage
  4. Control over credit use
  5. Retirement plan

Investment Selection Criteria

Following are the commonly accepted criteria for evaluating types of investment as well as specific investments:

  1. Risk
  2. Return
  3. Liquidity and Marketability
  4. Cost
  5. Diversification
  6. Taxes
  7. Efforts and Expertise

Care to be taken while Investing

Before making any investment, one must ensure to:

  1. Read and understand documents relating to the proposed investment scheme and verify the legitimacy of the same.
  2. Find out the costs and benefits associated with the investment and assets the risk return profile of the same.
  3. know the liquidity and safety aspects of the investment
  4. Ascertain if it is appropriate for the specific goals and compare these details eith other inve
  5.  Examine if it fits in with other investments already made
  6. Deal only through an authorized intermediary
  7. Seek all clarifications about the intermediary and the investment
  8. Explore the options available for recovery of the invested amount if something were to go wrong and then, if satisfied make the investment.
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