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Factors that can affect investment decisions for maximum return on investment

BY: David Prakash Kumar | Category: Business and Finance | Post Date: 2009-09-26

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   David Prakash Kumar
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Investment can be said to be an art. Many people invest money without knowing what they are doing. Only a few people really understand the art of investing money. They invest according to certain principles. There are also certain factors that affect the investment decisions. All these are done mainly to increase the return on the investment and also to keep the risk to a minimum. The various factors that affect the investment decisions are given below.

1. Rate of return :
The main reason for people investing money is to earn a high return on the investment. An individual may have various investments. Some may be fixed investments and others may be high risk equity investments. The individual has to periodically analyze the rate of return that is being earned from various investments. The portfolio of the investments may have to be readjusted depending on the rate from each of the investments. This will help the investor to earn an increased rate of return from various investments.

2. Inflation:
Each of the persons investments have to beat the inflation rate present at that time for the return on investment to be positive. If the inflation rate is more than the return on the investment of a person, then the return is negative when inflation is taken into consideration. Any investment has to beat the inflation to be efficient.

3. Liquidity:
The investor has to understand the needs to have money in hand for either an emergency or even a sudden change in investment strategy to earn a high rate of return on the investment. The equity market can have a sudden knee jerk reaction to any news and may create a buying opportunity. If this has to be used, the individual should have enough liquidity to invest in time. Liquidity is a very important factor in any prudent investment. People who invest without liquidity are likely to lose many golden opportunities that present from time to time for investment.

4. Tax benefits:
Tax benefits are a very important aspect to be considered when a person is investing. Tax can wipe away the return on investment if the investment is not done wisely. There are various investment options that are taxed highly. There are other investments for which the returns are either not taxed or have a low tax. The individual has to understand the tax laws of the land and invest accordingly to make high return on investment.

5. Frequency of return:
The frequency with which the individual gets return on his investment is also very important. These have to be very carefully followed for efficient reinvestment and also for the use of the returns for various needs of the individual. A part of the return on investment can be reinvested and the rest of the money should be used for any needs that may crop up.

These are some of the most important things that have to be remembered when a person is investing hard earned money. Adequate research and precaution in the matters mentioned above will help to maximize return on investments.

Article Source: http://www.saching.com

About Author / Additional Info: I am a physiotherapist and also a freelance writer. I have been writing for many blogs and websites and also take up freelance assignments. Comments are welcome at prakashdavid@rediffmail.com

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