The word “investment” can trigger many images—property, stocks, education, business, manufacturing, people, community—but almost always involves the foundation of money and time. Knowing how much money to invest, when to invest, what to invest in, and how to invest all bring the need for research and planning. The best investment opportunities are often relative to the views and beliefs of the investor. What should an investor consider when looking for the best investment opportunities?
Creating A Best Investment Strategy
The best investment opportunities should fall within an investment strategy. Investment strategies are based on time and available capital. Capital is the money an investor has available to invest. Time refers to a time-frame—a month, a year, several years, or a portion of an investors life-time. Therefore, a best investment strategy can be a short-term or a long-term plan. Gambling is not an investment. Putting money in an interest bearing bank account is.
Return On Investment
ROI, return on investment, is the concern of most investors. ROI is profit and the reason many investments are made in the first place. Compounding is a magical word to consider when investing. Return on investments can happen in stages. Rarely does ROI happen quickly. For example, stocks can rise or fall over the course of days, weeks, and years, which means ROI can happen quickly, dribble in over time, or never happen. Investing in your education can cost up front but provide a steady profit once you are creating income from it. The best investment opportunities produce a steady return.
The need to protect your financial stability happens at every stage of the investing process. There are two ways to protect your investment: compounding and diversification. Diversification means choosing a variety of investment products from different industries as a safeguard if one or more investments are affected by the marketplace. Compounding refers to compound interest, the process of reinvesting interest earned by investing the interest back into the principal investment.
Tax Advantages Are Important
Does your investment have a tax advantage? Check with a tax account or tax authority to find out what investments have tax advantages. Retirement accounts, annuities, and student loans provide tax advantages through tax deferment or tax deductions. Investments in state and municipal bonds are often tax exempt. Oil and gas investments have certain tax advantages. Some states create tax incentives to encourage building and commerce.
Protecting Your Investments
There are agencies in place to protect some investments. The best known, and the strongest in its capability, is the FDIC, Federal Deposit Insurance Corporation. There is also the SIPC - Securities Investor Protection Corporation, the SEC – Securities and Exchange Commission, and the FINRA – the Financial Industry Regulatory Authority.