Investor Profile
If you want to invest in any of the investment categories remember the importance of duration, risk, diversification, returns and liquidity. Before selecting any of the investment instruments, you should set your goals first and based on that you may develop your profile accordingly. So before moving ahead think about your investment nature. Based on your investment goal, you can select different profiles. Your goal can be:
1. Investment Duration
Before going for any of the investment strategies, you may need to decide how long you want to invest. This can be:
- Short Term: 0 to 1 year
- Medium: 1 to 5 Years
- Long Term: More than 5 years
The longer you invest, the higher are your return expectations. So you need to make sure that you’ll be able to get it when you need it. For example if your goal is to have money at your retirement age, so you can invest for a long period like 10-20 years.
2. Income or Growth?
This is dependent on the utilization of your investment earnings. Either you can be interested to earn as income to live off during the duration of the investment or want to get return as a lump sum to reinvest. The objective of an investment is to decide the frequency and amount of return you want to get.
3. Liquidity
Liquidity means the speed in which you can convert your investment into money before the end of your investment period, without taking a loss. Some investments may be illiquid where there is fixed term feature embedded. In this case the chances of return or capital loss can be higher.
4. Risk Level Involvement
Higher returns are only available with higher risk. The risks come in two types, volatility and the performance. Volatility, depends on the up and down of your investment value. On the other hand performance depends on the chances of investment failure. Risk can be managed through multiple investments.
5. Size of investment
Selection of investment is also dependent on how much investment you have. Certain securities are size bound like bonds and TFCs. These are available in different denominations and you can select on the basis of available amount.
