Whether you’re a new or long-term wizard in the investment world, things may get shattered if you don’t take the right approach for every investment opportunity. As Warren Buffett said, “Risk comes from not knowing what you’re doing.” So, here are top 10 ways you can prevent any risks while taking any investment decisions to maximize your wealth or business.
Top 10 Things to Consider Before You Invest
Here are top 10 key things to consider before you take any investment decisions in 2023:-
1. Reason for Investment
Before you take your step into the investment world, determine what your goals are in the investment world. If you want to achieve a long-term corpus, or a dream car, or house, or family vacation, you can figure out how much money you can invest for fulfilling the particular investment goal. In this way, your investment advisor will suggest your investment channel for longer-term (equity funds) or shorter-term (overnight funds) goals
2. Risk Appetite
Some funds have a larger risk appetite than the other. So, consider your risk tolerance while selecting any appropriate fund for your investment. This will help you very much to choose investments that measure risk profile.
3. Time Horizon
Be specific on selecting your investment zone based on your preferred time horizon. If you want to achieve long-term goals like children marriage, or education, you need to set your investment goals accordingly. On the other hand, for short-term profits, you can choose a comparatively less time-taking investment horizon.
By diversifying your investments across different asset classes industries and geographic regions, you can reduce the risk and increase potential returns on investments. Try to invest through SIP investment to save your goals, as well as diversifying your investor portfolio.
5. Investment Fees
Try to consider the fees associated with the investment. It can include the management fees, transaction cost and other expenses. These fees can erode your returns over time so it’s important to choose investments with low fees.
6. Investment Liquidity
Liquidity is an important factor while considering investment goals. If you select an investment option with higher liquidity, you can almost withdraw the money immediately. Whereas if you choose low liquidity you may have to wait longer or for a specific time to withdraw the money.
7. Tax Implications
According to the new tax policy, you gave additional benefits to investing your money. There are different criteria for both LTCG (Long-term Capital Gains) & STCG (Short-term Capital Gains) investment. In addition, there are many tax-free options for new investors’ upto 12 months. So, go through the rules of the new tax regime to decide your investment portfolio.
Based on your investment goal, you can select investment funds with better ROI. Compared to traditional assets, the ROI has been higher for various deposits in the mutual funds, which have been profitable for investors even during inflation. So, choose the investment vehicle that has better returns as per your investor portfolio.
9. Investment Performance
Research the historical performance of the investment including its returns and volatility. Past performance is one of the indicators of future results but it can provide useful information when evaluating an investment.
10. Company Model
When considering investment in a company there are some good things to remember. Understanding the business model, or how it generates revenue, consider financial reports, debt levels and cash flows, competitive landscape, industry trends , corporate governance practices, environment, social and governance factors, and valuation to measure potential risks.
While measuring investment decisions, there are various factors to consider. The points mentioned here play one of the crucial roles in the investment world. However, try to do your own research, try to test method, and take advice of experienced investment experts to give you the correct advice analyzing the market conditions for your investments.