Anyone seeking to diversify their investment portfolio needs to take a look at other options. Investing money in properties, vehicles, and other valuable assets such as famous art pieces do appreciate monetary value. But, these investments take their time to give you yields after long periods.
Hence, investment gurus recommend going for investments that yield greater returns over a shorter period. Thinking along the lines of stocks, bonds, annuities, investment funds, etc are all viable choices. The recent and most popular addition to the list are cryptocurrencies such as Bitcoin.
However, jumping into the fray without any prior experience can land you in a tight spot. So, before you think about buying anything from any company, do a little bit of research about the investment that interests you.
Now, there are multiple things to keep in mind before you invest in stocks or other such ventures. Read on to find out about the variables that can significantly affect the prices of your investments.
Primary Factors That Affect Investments
1) Interest Rates
Many investors look to increase their investments, not through saved-up cash but by borrowing. For example, if you want to buy a new house or car, you need to borrow. Now, higher interest rates are equal to expensive loans. In short, you’ll have to pay more for the house than it’s worth, and that may even spell out more installment payments.
On the flip side, with low-interest rates, borrowing becomes cheaper. This is only possible in stable economic and political conditions.
2) Economic Growth
If there are clear indications of a rise in consumer demand, both individuals or firms invest to meet economic demand. However, this is mostly possible if there is economic growth.
Many factors affect economic growth, such as increased tourism, more consumer saving, an increase in exports and a decrease in imports, foreign investments, and even technological advancements.
3) Confidence
The more you are confident of your capabilities, the more likely are you to invest more. Consumer confidence also increases when there is economic stability. When you are saving, have job security, and feel that you can make a long-term financial commitment, then you look for investment options. Moreover, such conditions are prime for investment, as the borrowing costs are low, so the rewards become more.
Companies and other corporations function in the same way. The more there is confidence in the growth of the economy, the more they are willing to look for venues of investment. It’s more of a spiral effect, where the more investment goes into the economy, the stronger it becomes.
4) Inflation
One of the most common indicators of a stable economy is the inflation rate. The more stable the inflation rate, the more investment there is going to be in the economy. The reason for this is simple. Volatile inflation rates mean that the future cost of the investment may be higher. Therefore, any individual of a firm looking to invest will take into consideration the prevailing inflation rates.
You don’t just take into account the current inflation rate. Most investors study the trends in inflation rates over at least five years before making a long-term investment.
5) Availability Of Finance
In a recession, it’s essential to remember that banks are unwilling to give loans, both to corporations and individuals. You see, there is always the possibility of defaults. Thus, if you want to invest, make sure that economic conditions are favourable.
Sometimes, you find that certain investments, such as properties, become a buyer’s market, where the property value is less. It becomes tough to get loans in such conditions. But, it’s an ideal time to buy property in such circumstances.
6) Productivity Of Capital
Any technological advancements that become popular with consumers trigger massive investments. The concept of technological advancements strengthening the economy is evident when you take a look at nuclear technology becoming productive for agriculture. Similarly, you see the introduction of new technologies such as cryptocurrencies that have encouraged huge investments from major corporations as well as individual investors.
Once, people wondered about the uncertainty associated with Bitcoin. Now, there are literally dozens of cryptocurrencies in the market, ample forums to buy and sell them, and many more apps to keep track of your investments on the go.
The introduction of cryptocurrency opened a gateway to the whole new industry, where entrepreneurs with ingenuity created multiple investment opportunities.
7) Depreciation
Any investor worth his name will tell you to keep a close eye on your investment portfolio. You see, stocks or cryptocurrencies are not the only investment likely to face ups and downs. Many fixed assets such as your house, automobile, or even heavy machinery for your business face depreciation.
Being prepared for such eventualities keeps your loss minimal. And, the more the investment is likely to depreciate, the further away should you stay from it, especially if you are a novice investor.
Regardless to say, making investments is a tricky business. If you haven’t done something like this before, then get a professional to help you out. You’ll find plenty of professional investment counsellors or investment firms that can steer you in the right direction. These guys are perfect because they only charge commissions when you make a profit. So, they, too, have a vested interest. Hence, you can be sure of being guided toward fruitful investment schemes. Check here how are stock options taxed.
In Conclusion
As we mentioned earlier, you have people out there to help you out if you are a first-timer. There are also plenty of platforms where one can learn the basics of investing even on their mobile phone. The best investment apps UK, help provide vital information that assists amateur and professional investors alike make more informed investment decisions.
Do not be wary of these investment apps or enlisting an investment firm to provide you with beneficial solutions to secure a more stable financial future for you. Finding out avenues where you can securely save and grow your money can be hugely beneficial, especially, when you near retirement age.