What every investor should know before making any type of investment

People invest for many reasons.  Some invest to reach specific financial goals, such as buying a house, paying for education or saving for retirement.  Some want to receive additional income through dividends, interest payments, or rental.  Some want to increase their net worth over time by investing in assets that have the potential to appreciate in value, such as stocks or real estate.  Some want to earn a return that is higher than the rate of inflation, which can help preserve the purchasing power of their money over time.  For those already invested, portfolio diversification can potentially reduce risk and increase the chances of earning a positive return.

To invest in any kind of investments, investors should have basic understanding on the following

• Investors should have clear investment objectives, such as capital appreciation or income generation, as this will help them determine which types of investments are most suitable for their needs.

• Investors should consider their investment horizon, which is the length of time they plan to hold an investment.  This will help them determine which types of investments are appropriate, as some investments, such as stocks, are better suited for long-term investments, while others, such as short-term bonds, are more suitable for short-term investments.

• Investors should consider their risk appetite, as this will help them determine which types of investments are suitable for them.  Some investments, such as stocks, tend to be more volatile and carry more risk, while others, such as bonds, are generally more stable and carry less risk.

• Investors should consider diversifying their portfolio by investing in a variety of asset classes, such as stocks, bonds, real estate, and commodities. This can help to spread risk and potentially increase the chances of earning a positive return.

• Investors should be aware of any fees and expenses associated with an investment, as these can significantly impact the overall return on an investment.

• Most importantly, investors should do their own research and carefully consider the potential risks and rewards of an investment before making a decision.  

There is no one size fits all in investment and the best investment for you depends on your individual financial situation, risk tolerance, liquidity needs and investment goals.  But here is one golden rule  from Warren Buffet, “Never invest in a business you cannot understand.”