investment planning: What I need to know

Investment Planning: Have you been thinking of making an investment? Are you a professional or an amateur seeking knowledge on the said field? If yes, then, you’ve come to the right department. Before we dive into the topic of investment, it is paramount to understand the meaning of investment.

What is Investment?

An investment can simply be defined as a process of acquiring wealth or assets in order to secure financial/economic freedom in the future. An investor is one who partakes in an investment.

What is investment planning?

Investment planning is the process of matching financial goals and objectives with your financial resources. Investment planning is a major component of financial planning. It is impossible to own one without the other.

Investment planning is also a process that starts when you have a clear part of your financial goals and objectives.

Why Should I Invest?

Investments are a sure way to acquire wealth as long as it is done correctly. Many people make wrong investments which end up yielding negative results due to lack of information and personal or professional training.

Often, we get so carried away with life responsibilities and forget to invest and save up for rainy days, this article is to help guide you back on track. It is never too late to invest in any medium that will yield profit.

Here are valid reasons why it is important to invest:

Increase In Financial Capacity

This reason is one of the most popular reasons why people invest. When you invest a certain amount of money into a business or project, the output expected is to yield profit from that investment. This is one of the best investment planning.

Early Retirement

The question is, “who doesn’t want early retirement”? When you invest in profit yielding projects, it helps to gather wealth and you see yourself moving towards financial freedom at an early age. This is also one of the great steps to investment planning.

Solving Financial Problems

Solving financial problems is one of the best investment planning steps to take. With the wealth gathered through previous investments, one is able to solve issues that could come up in the future.

Encouraging Saving Habits

Investors primarily are savers. The practice the act of saving through investing in projects that will generate returns.

Ability To Afford A High Standard Of Living

An investor accumulates wealth, he/she allows their money to do the work while they relax and are able to enjoy the benefits of standard living. This is also one of the best in regards to investment planning.

What are the characteristics of a good investor?

It is important to note the characteristics of a good investor after understanding the reasons why it is very important to invest. A good investor MUST be patient, passionate, be a quick thinker and a quick learner, be able to take risks, use every opportunity to his/her own advantage, be disciplined, persistent no matter the condition, focused in every move they make, plan ahead before making any moves, learn to have emotional stability, have a broad knowledge on the projects about to be invested into, be able to set and achieve goals, etc. A good investor also attracts good investments. Characteristics of a good investment are into four categories, namely; risk, liquidity, safety, return.

Risk

A good investment has some form of risk. This concerns the safety of the investment. Factors which increases the risk in an investment include:

  • The maturity date of investment. The longer the date of maturity the more the risk of the investment.
  • The creditability of the borrower.

Liquidity

Every investor wants an investment that is easily marketable and does not incur any losses. It involves easily converting investment into a cash form. In other words, the liquidity of an investment is the ability of that investment to be easily marketable or resaleable.

Safety

The desire of any investor is the certainty that there would be returns after an investment. A good investment has to be able to convince and investor that there wouldn’t be any unexpected losses.

Returns

The main reason why people invest is to get returns from their investments. Every good investment must have the credibility to ensure high yield and consistency. The nature of the investment and the maturity date of that investment are factors that could affect returns.

What are the Advantages And Disadvantages Of Investments?

It is very evident that anything which has an advantage also has a disadvantage. As someone who is interested in making investments, it is advised to also know the advantages and disadvantages of making an investment. Some of these include:

Advantages

  • Investing is a trusted method of gaining high returns.
  • It facilitates financial freedom.
  • Investments allow your money to do the work for you. This means that you do not need to do any physical work before your investments yield profits
  • After a period of time, you become eligible to have lower tax rates within a short term of investing.
  • It gives investors an alternative to making money.

Disadvantages

  • The possibility of making losses on investments is an option.
  • Prices of investments tend to be flexible. This means that there is a possibility that the value of the investment can rise or fall.
  • It can be difficult to make decisions that would gain profit.
  • Returns can take so much time to achieve.

What are the Steps To Follow When Making An Investment?

  • Set out capital: you cannot invest if you do not have any capital or properties of monetary value. This step is the most crucial because, without it, investment becomes impossible
  • Map out a plan or strategy which you would follow through: it is important to set out a plan or strategy, to set out the goals you aim to achieve in the investment you are making.
  • source for information from professional or reliable sources: it is said that knowledge is power, it is important to make inquiries which will enable you to understand the investment market or niche. At this stage, it is advised to seek professional help.
  • Do not focus on just one company or market to invest in: it is not advisable to just place your focus on a firm or market. In the case of any liquidation, you do not stand the risk of losing all investments if you invest in more than one company or market.
  • Start investing.

Every business owner who has investors in their companies require the above points in order for their business to run smoothly. On the other hand, investors also need these points in order to run their company smoothly. An investment is a lucrative way to save and make money at the same time.

What are Investment summaries?

Investment summaries are documents that contain all the issues the investors or stakeholders want to be solved. These issues are discussed between stakeholders and solutions are proffered. An investment summary is needed by bodies such as;

  • Angel Investors: The investment summary is necessary for these financing bodies in order for them to decide if they would provide capital to start-up.
  • Investors: Investors need the investment summary in order to get some sort of clarity on the investments they make.
  • Banks: Banks ask bout the investment summary of companies in order to understand the financial capacity or goals which the company has set out. This information allows them to decide on the amount of money they are willing to provide to the company. This investment summary is also one of the best.

Conclusion

At some point in life, it is required for you to make an investment in order to secure the future. The above points are the basic requirements in order to understand and make an investment in any aspect you choose. It is always advised to seek professional help, even if you are conversant with the term.

FAQs to Investment planning:

What is the definition of Investment Planning?

An investment can simply be defined as a process of acquiring wealth or assets in order to secure financial/economic freedom in the future. An investor is one who partakes in an investment.

Why do you think I should Invest?

Investments are a sure way to acquire wealth as long as it is done correctly. Many people make wrong investments which end up yielding negative results due to lack of information and personal or professional training.

What Are The Major Characteristics Of A Good Investor?

It is important to note the characteristics of a good investor after understanding the reasons why it is very important to invest.

What Are Investment Summaries to Note?

Investment summaries are documents that contain all the issues the investors or stakeholders want to be solved. These issues are discussed between stakeholders and solutions are proffered.

What Are The Vital Steps To Follow When Making An Investment?

1. Set out capital
2. Map out a plan or strategy which you would follow through
3. source for information from professional or reliable sources
4. Do not focus on just one company or market to invest in
5. Start investing.

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