Before investing, find out your investment objectives first
November 28, 2006
You probably know by now the different types of investment products. Before deciding whether to go for time deposits or mutual funds or UITF or savings accounts, assess your objectives for investment first.
No two investors are alike, so says Citibank in their Personal Finance primer, and people have different goals when they invest. Generally, an investor will have any of the following reasons for investing:
- Regular Income / Earning Stream
- Wealth Accumulation
- Capital Preservation
- For Retirement
- Child’s Education
- Business Formation
After determining the investment objectives, the investor must then assess the risk he is willing to take in order to achieve the objectives. Try this simple What type of investor are you? quiz to find out the level of your risk tolerance.
Some additional factors to consider prior to investing include:
Time or investment horizon
The meaning of “time horizon” or “investment horizon” is the period over which the investor is willing to keep his money invested.
The amount of money the investor can set aside for investing. Most financial experts suggest that prior to investing, one should set aside cash reserves equal to at least six months of normal expenses.
After determining the investment objectives, risk-return preference, time horizon for investing and the funds available, the appropiate investment alternatives (aka investment options or investment products) are then chosen.
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