Investment Decision Essay

Experts are happy to tell you how important it is to invest your money in order to make it grow.

However, they don’t always tell you where you are supposed to get the money to invest, especially when you are trying to balance all of the expenses that come with daily life against the future benefits of investing today. However, if you have some money left over by the time you’ve paid off all of your bills, completed your personal expenses for the month, and (perhaps) made your alimony and child support payments, then you’re ready to invest the remaining cash to help make more money. But how should you make your investment decisions?

There are five key steps to making solid investments that will help you to make the most out of the money you’ve saved from your salary or wages. Let’s take a look at a series of steps that will help you maximize your return on investment. Please note that this essay does not advocate a specific investment strategy and should not be construed as offering financial or investment advice.

As always, it is a good idea to consult with a certified professional before making an investment decision:

1. Determine Your Investment Purpose. Before you can make a sound investment decision, you need to know what you want your money to do for you. The investment strategy you use will vary considerably depending on the purpose you want to achieve. For example, a more aggressive strategy might be appropriate to earn money in the short term, while a less aggressive strategy would be beneficial to build security for your returns over the long haul. Similarly, if you have a fixed amount of money you are hoping to assemble, your investment choices will differ from a person who simply wants to maximize profits. Decide on your goal and what you want to build cash toward, be it a car, college, retirement, etc.

2. Determine Your Investment Time Frame. The next step is to determine how much time you’re willing to let your money remain tied up. A person who needs money quickly will need a different strategy from someone who is willing to wait 1, 5, or 10 years to realize gains. Some investment products, like CDs, require money to be invested for fixed periods of time, while others, like stocks, can be liquidated at any time. Consider how much time you have.

3. Determine Your Comfort Level with Risk. Every investment carries risk. Not even the safest investments are entirely risk-free. The question is how much risk you are comfortable taking on. In general, the riskier the investment, the more it will pay off—but also the more likely it is to go bad and leave you with nothing. In general, younger people can take on more risk because they have more time to recover should something go wrong.

4. Determine the Tools You Will Use. Investing is more difficult that simply showing up at the bank and handing them a stack of cash in exchange for interest. To take a simple example, even a basic interest-bearing investment requires a clear understanding of the tools involved. If the investment pays simple interest, your principal will generate the same interest each year, but if your investment pays in compound interest, your principle will generate interest, and then the principal and the previously paid interest will both generate interest in the next cycle, and so on. One investment pays significantly more than the other. Know your tools!

5. Determine How You Will Monitor Your Investments. No investment is likely to be right for you for the entirety of your life. You need to carefully review your investment portfolio to determine when to sell assets and invest in new ones. By carefully monitoring and adjusting your portfolio from time to time, you can help to maximize your assets and the likelihood of profit.

About author: Martin L., freelance essay writer, https://cheapwritinghelp.com

6 thoughts on “Investment Decision Essay

  1. Div Hut, I completely agree. There is so much to investing. There are different asset classes, various strategies to pursue within each asset classes, etc. It can seem overwhelming at times. It is worthwhile, especially for a beginner investor, to take a step back and consider the fundamentals. What are you goals, your investment time frame, and your level of risk.

    Very key questions indeed and a good reminder for us all.
    Dividend Portfolio recently posted…Credit Score Went DownMy Profile

    • Hi DP,

      Well said. There is definitely an “information overload” when it comes to investing and one should always outline an investment objective first and create a plan to follow that objective. it may be investing for capital appreciation, income, preservation, etc. The bottom line comes down to what one expects from their investments as well as their risk tolerance. Thank you for commenting.

    • Hi MYM,

      Investing is a very personal endeavor and one must figure out what they expect from their investments before actually starting. Too often people jump feet first into an arena with little or no knowledge and get burned. Thank you for commenting.

  2. Those are really important factors to consider when anyone is starting out in the Investment game. It exactly as the name implies, “investment”, which is inherently risky. When anyone ask me for advice how to get started, I immediately refer to your point 1, and 3. Then Point 2 after I have those information. I think everyone loves to idea of big returns, but generally won’t be able to stomach the risk. I generally would tell people how or what I’m investing in, but would NEVER recommend investing the same way as I do. Everyone circumstances is different.
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    • Hi MD,

      As you stated, everyone dreams of the ‘big score’ without really understanding the risks involved and the potential for a total loss. That’s the part of investing individuals have to come to terms with and figure out what their risk tolerance is. As always, I appreciate your comment.

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