Reading my previous two posts you must have known till now about investments and which category of investors you belong to. I got suggestions from few to write about where to invest. But the analyst in me thinks otherwise. Before recommending where to invest, every analyst first considers what the client wants, how much he can bear risk, what is his capacity to invest and what not. There are various things to consider before recommending any set of investments. Here, I won’t be asking you to consider things from the analyst’s point of view but the client’s. Analysts have to consider not only the client’s needs but also of the firm’s, he/she works at. The firm’s policies, market situation, industry and company’s situation, etc. are some key factors for analysis and at times, the analyst has to apply various approaches to find the right investment. But I am not going to the complexities here by taking up analyst’s work. The main aim of this post is for you, the readers, to consider certain things before investing.

Time horizon plays one of the most important roles in any investment – whether you want to invest for a short term period or a long term period. Some people invest for short term gain, sometimes experimenting with how the stock market works or how to make a profit out of trading and sometimes maybe their needs are for short term. Long term period are considered by those who want to meet the needs at a later period may be for marriage, buying a car or a house, medical treatments, retirement, pension, or wealth generation. The period mostly reflects your perspective towards investment like what you want from your investment or what purpose these investments are going to serve. So much of thought one normally puts, when he/she is going to invest a lot of capital in it either lump sum or a small amount periodically like SIP which is Systematic Investment Plan and also much consideration goes for lock-in period (the period in which you can’t redeem money) as well. Yes, the second thing to consider is how much capital you are ready to invest. Investment can start from the lowest amount but that also depends when you are starting and with what perspective. Money is considered at both ends – one before investing, and the other how much you are expecting it to grow at maturity.

Third aspect comes the risk. Some investments are risk-free and some involve a huge amount of risk. Even the lock-in period as mentioned above can be considered as a risk. If you invest some amount with a lock-in period and any emergency occurs in between then it is difficult to take out money out of it. The fourth is your motive of investment as I mentioned some while discussing the time horizon. Your motive, needs, expectation, attitude, and choice towards risk and certain type of investment – all play a vital role in investment. Here, I mentioned a certain type of investment. Types of investment comes with a long list which requires a long discussion but here, in short I would say either you invest to own or just to enjoy periodic return. Apart from your needs, your beliefs too determine your investment decision. Yes, you read it right. If you believe that certain industries or companies add too much pollution in the environment and you have no liking for it then, you can choose not to invest in those firms. Same for other industries as well whose products you don’t like or don’t want to encourage. Another thing to consider is where you want to invest through –stock market, mutual funds- either directly or regular, apps, builders (when investing in real estate), insurance, and many others with numbers adding up every year in the market. The government policies also have a hand in investment decision. People mostly prefer to invest where tax-deductions are less or even better when exempted.

These are some basic things to consider before investing. Every investor is unique and he/she may have other things to consider. It varies amongst investors. But time, capital, risk, preferences, taxes, and mode of investment are the basic ones which are always considered in every investment. In this dynamic world, our needs change with time. It is our needs and demands that bring fluctuation or change in the market. It’s not the financial institutions that are solely responsible but every person in the society influences the market. I know you are aware of these considerations but I believe after reading this you might have got more clarity than before. Keep experimenting and keep investing. Remember, we all are investors.