Investments are made with the overall aim to cover unexpected financial difficulties and provide them with security.
Against this broad background goal of investment, different people, however, tend to have diverse essential desires for investing. Despite these differences, certain principles apply in most cases, this post tend to overview some of these essential indicators for investing for different investors.
Age
Age has been found to be one of the major determinants for the degree of patience for each individual. This essentially makes the younger investors more long term in the view and expectation of investment rewards, while the old investors will most times want their rewards in the short term.
Risk Averse Tendencies
Risk taking dictates the kind of investment we pick. While the level of risk in investments, most times, is compensated for by the level of returns attached to them. Each investor still have to make that conscious choice on risk and optimize investment decisions around risk loving boundary.
Diversification
Diversification measures the spread of investment. This can be across different countries or business/ economic sectors. The spread of investment gives a level of stability to the daily irrational movements in stock prices - called Volatility
Do not put all your eggs in one basket.
Degree of Involvement
A further consideration is investor involvement, measured by how active you want to be on the trading floor. Laid back investors will want to delegate the trading role to specialists in form of portfolio managers.
While this decision bothers on the interest and availability of time, skill set of each individual still plays a major role in deciding on the degree of involvement in trading of investments.
Do you have other important considerations as an investor? kindly indicate in the comments.
We should get into the nitty-gritty of each investment types in subsequent posts.