It is increasingly common to find content about investments and people recommending others to invest, but what is investing and what should be taken into account? This article has been written by a famous NYC fraud lawyer who can help you in any of your financial fraud and help you to get your hard-earned money back.
What is investing?
Investing is dedicating resources in order to obtain something in return. In the financial field, investing is putting capital to work, such as an amount saved or extra income, in search of profit. When making an investment decision, it is necessary to consider some factors such as:
Cost-effectiveness
- It is the return that could be obtained thanks to an investment.
- Profitability is not guaranteed, since it depends on variables such as the national and international economic context, the good or bad decisions of the investor, among others.
- To a greater or lesser extent, the risk is always present in any investment. That is why it is said that it is not possible to invest without taking risks.
Risk
- It is the possibility that the results of investment are negative or below expectations.
- In all investments, there is an inverse relationship between profitability and risk, where, the higher the profitability, the more risk would be assumed.
- Within the risk scale, there are three types of investors: the conservative, who prioritizes security over profitability; the moderate, who is cautious but can take some risks; and the aggressive one, which accepts high risks in exchange for higher profitability.
- You can learn more about the relationship between profitability and investment risk.
Time Horizon
- All investments have one thing in common: sacrificing the opportunity to use that money in the present to make it grow and put it to better use in the future. But how long are we talking?
- For this reason, there are short-term investments (it can be a year or less), medium-term (more than a year) and long-term (5 years or more).
- It is important to take these horizons into account when setting goals. For example, a trip could be a short-term investment goal, while a retirement fund would be a long-term investment goal.
Diversification
- Investing in different economic sectors, currencies and countries allow you to diversify your investment risk and take better advantage of the opportunities to obtain profitability.
- The logic of diversifying investments is similar to when you have a certain number of eggs and some baskets: if you put them all in one, you risk losing them, but if you distribute the eggs in several baskets, the risk is much lower.
- In this note, we tell you more about the importance of diversifying investments, the types of diversification and more.
Historical behaviour
- According to an Elder fraud attorney, analysing the results that investment has achieved in the past is a reference.
- Although doing this is not decisive, since past returns do not guarantee future ones, it can help make better-informed decisions.
Hope you have understood the rules of investing and you would definitely take all the decisions wisely.
