We are all interested in identifying a good investment, that’s for sure.
But some of us are not content with just that.
There are enough people who are looking for the absolute superlative and want to find out what is the “best” investment.
So, as far as investments are concerned, the notion of “best investment” – in general terms – simply does not exist!
Because in this area everything is relative and depends very much on the preferences and peculiarities of each of us.
In other words, it’s like going to a restaurant and asking the waiter to recommend you their best meal …
Obviously, he does not know your tastes and preferences, so he would not know if you like meals based on meat (and what kind meat) or vegetarian, if you want something more consistent or a salad would be enough. In the end, the decision is largely subjective because it depends only on your particularities.
Exactly the same is true of investment.
No one can tell you from the start what is “the best investment” for the simple reason that it depends exclusively on YOU.
However, there are some criteria that you can determine if a particular investment is or is not right for you.
Here are 5 criteria according to which you can determine which is the best investment for YOU:
1. The degree of risk of the investment
The first thing we think about a certain investment is its degree of risk.
Therefore, in order to know what kind of investment we are going to (and of what kind of investment to keep away) it is very useful to know our own risk profile.
For example, if we reject the idea of risk from the start, it is best to focus on the guaranteed investments, such as bank deposits and government securities. But if we are willing to accept a certain risk, but a small one, we have low-risk investment funds.
On the other hand, if we can accept capital markets fluctuations in hopes of achieving greater long-term profits, we can opt for investment in stock exchanges or different kinds of commodities.
2. The investment profit level
We must always keep in mind the reasonable profit level that a certain type of investment can realistically bring, in order to match the degree of risk of that investment.
Only in this way can we determine the risk / reward ratio for a particular investment and thus compare different types of investments.
3. Duration of the investment
It is very important to establish from the beginning what is the minimum time interval that we are willing to stay with that amount in a certain investment.
In this way we can match the duration of an investment with its degree of risk, so we will not to get into the situation where we have to withdraw that money at a time that is less favorable.
For example, for a short or medium term, usually the most useful financial instruments are those that are guaranteed or low risk. Because the particularities of capital markets or real estate are acceptable only if we are considering a long or very long term.
4. The amount invested
However attractive it may be at one time to invest in building a block of flats or a mall, this would probably exceed our financial availability.
So finding an investment that fits both in size and flexibility with our budget is more important than just considering the profit it can bring us.
5. Location of the investment
There may be enough types of investments that seem interesting to us, at least at first glance, but some may not be accessible to everyone.
For example, if we were interested – let’s say – investing in government securities issued by India (with an annual yield of nearly 7%), we will find it hard to find a broker that have them available in its offer.
So the physical location for a particular investment as well as its availability are important elements to consider when trying to find the best investment for us.