Best Investment : Tips to choose an optimal investment

As I discussed yesterday (previous post, today I will present the best investment opportunities available for hardly saved money. There are plenty of investment opportunities all around you, but how you select the optimal investment plain that suitable for you? Here are some investment opportunities available in general.

  • Invest in Stock Market
  • Exchange traded funds
  • Bond, Money market accounts
  • Invest in Real estate
  • Commodities like gold and silver
  • Invest in growing business
  • Money lending
  • Invest in digital Currencies like bitcoins

Then how you find optimal investment strategy or combination of investments. For that following factors should consider

  • What are the needs or goals of investing?
  • How long can you invest?
  • What are the charges they claim?
  • What are Terms and conditions applied?
  • What are the Government Requirements applied?
  • Risk of investments?
  • Inflation in the country?
  • Environment factors affect to interest rates?
  • Are there reliable Sources of funds?
  • Benefits of the investment?

There are some more factors need to consider and those are depending on the investment you do.

Let’s see the investment opportunities in detail.

Investment in Stock Market: one of simple investment opportunity available. You can purchase shares of publicly traded companies. End of the financial year, company may distribute dividends to its shareholder. Price of a share may change frequently. You should review share prices to sell shares when the price was high and keep or buy shares when the price was low. However, there is risk that companies may fail. So, you should have to keep touch in the changes in the share market. But there are different stock investing strategies like growth investing, value investing and dividend investing. You can move with strategy fit for you. This is an interesting thing for a person who know about market well. But if you don’t have much knowledge about the market changes. You can appoint an agent to work on behalf of you. Then they will inform changes in market and advice you.  

Invest in Exchange-traded funds: if you do not know to select individual companies to invest in the stock market, you can invest in Exchange-traded funds. It will comprise with pool of investing in different companies. Then your investment will not limit to one company. Because investing in different companies risk of your investments also hedged. You only have to select the market, strategy or sector you like to invest. Due to lower charges and tax reliefs, Exchange-traded funds are incredibly cost efficient.

Bonds and money market accounts: Those are the most stable investment opportunities. if you’re a risk averse person, these kinds of investments are suitable for you. Investments are offered for different periods, such as 3,6,12,24,48,60, months etc. If you buy bonds with 2.5% interest rate for 10-year period. Straight forward you can know the return on investment in 10 years’ time. However, you cannot take back your money until the maturity date.

Invest in real estate: investing in real estate is a grate investment opportunity because of the infinite value of real estate assets. You can buy a building or build place for business and rent out. Or you can purchase empty land and sell once the market value of the land was increased. Also, you can mortgage the property and a get bank loan for another investment. You should buy real estate in right time and should sell in right time. If you prefer to invest for long term, this is the best opportunity.

Invest in commodities like gold and silver: there is tendency of increase in the real value of gold and silver because of the scarcity of such metal in the word. As investment in real estates, you should buy such commodities in right time and hold until the right time come.

Invest in growing business: instead if starting a new business by yourself, you can invest in a business which is going to be successful. Your investment in the business will become you an owner of the company. Then partner of the company can share profit base on the invested amounts. Prior to invest in growing business, you should closely review probability of return by investing in that company. For that you need to evaluate the company in terms of internal and external factors. Such as market position, customer base, gearing level, market opportunities for company products, ability to diversify the business in case of fail, competition, etc. You have to make a right decision at the right time, otherwise you may lose your money.

Money lending: You can lend money to others for a specified period and let them pay back with an interest. The Interest rate will depend on the amount you willing to lend. This is a high-risk investment, because there is high possibility of losing money by being the default.

Invest in digital currencies like bitcoins: This is also high-risk investment because of some technical and security issues. The value of digital coins, mainly depends on the faith if investors, its integration into financial markets, public interest in using it and its performance compare to other digital currencies. You should have digital wallet and online marketplace to trade currencies. There are plenty of digital currencies in the market, you should review the marketability of such currencies prior to invest. And be aware of fake online market places in the internet, otherwise you may lose your money.

There are some more investment opportunities like mutual funds, invest in collectibles, fixed deposits. My advice is finding out optimal mix of investment fit for you found sources, do not depend on one investment. Multiple investment in different sectors (invest diversification) will reduce the risk of the investments and give a higher return on investments.

Here are some investment appraisal techniques that you can use to evaluate the investment prior to fund.

  • Return on investment = Return / Total investment value [ percentage of return raise for the investment]
  • NPV = PV of future cash flows – initial investment [ Discounted future cash in and out flows]
  • Payback period = investment / cash in flows [ how long it will take to recover the cost of investment]
  • ARR = Average net profit / Average investment [ net profit arising from the investment as percentage to investment]

1 thought on “Best Investment : Tips to choose an optimal investment”

  1. Valuable presentation and useful for learning.
    Please, if you can present the Dividend policies for the purpose of learning it will useable for students

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