Investment decision making process requires prudence. Whether the amount is small or big, you need to have complete information about the place or field where you are going to invest it before making any decision. Investment decision is most often made with a purpose to accrue good returns in future. Investment is like a source of income where initially you put in some capital and expect it to multiply or boom in the near future. There are various types of investments nowadays and different strategies are associated with them. Investment can be in the field of property, land etc., in the stock market, in bank in the form of fixed deposits, in trusts and insurance policies.
When you move out to invest say for instance in property, the strategy of buy for low and sale for high prevails. In the language of investment this is called the ‘arbitrage’. What you require first of all is a perfect idea of the fluctuating market. When the market value is low, make as many purchases as possible. When the market as you assessed picks up pace, sell whatever you purchased at simply double the price. This profit however is not possible without a vigilant study of the market. An investor who has scrutinized the market from top to bottom predicts the highs and lows of market and makes purchases much before the onset of the profit season.
Arbitrageurs are very smart nowadays. In order to incur huge benefits, they have a decision making process to go about purchasing some very archaic piece of furniture or property from a low price market, invest a few more bucks in its renovation and then sell it in an expensive market or put it up at auction on the internet.
There are times when massive investments are being made in one area, this is known as the ‘market bubble’. Take for example, if a piece of land in a specific area is inviting too many buyers and that too with unbeatable profit, there is a horde of investors to purchase land in that area and sell it for the maximum possible. Similar is the case with the stocks of a company that is giving brilliant dividends to its stock holders, if the company lowers even a single dollar on its stock, multitude of people gratify their desire to receive excellent gains later.
Related to this is the ‘value investment’. Here the investor estimates the value of the company in the form of its returns. If a company has a good record with its shareholders and its shares are relatively at a lower price in the market, the investor will purchase maximum shares as possible since he is confident of the company’s value. The investors basically peep through what is visible in this case. Many companies only flaunt to be successful in the market but actually they have been charged with many illicit proceedings. While there are companies that make a slow and simple start and scale new heights gradually. The investors are in search of these types of companies, the ones that are not feigning to be great. An insight into the actual situation of the company prompts the investor to make prudent investment decisions.
The risk factor is always lurking behind these investments. Therefore the investment decision making process should be carefully designed. It could be a case that the buy low and sell high strategy does not work, that the market does not soar high as forecasted. In this case huge losses can meet your investments. It can also be a possibility that the stocks of the company that is deemed to be performing well, do not meet the expected surge in price or that the company rather than progressing starts retreating. So, the risks cannot be ignored at any cost and it is also a fact that the long term predictions about the market, company etc. might turn out to be true, short term ups and downs are reasonably difficult to foretell. So the financial advisors mostly speak the lingo of long term investments so as to ignore the short term impediments.
It is advised to take guidance from a good financial advisor before making any investment. For a colossal loss in investment is potent enough to ruin the entire life of the investor.