Right from buying a mobile phone to buying a car to choosing an investment product there are a number of options available today. The majority of investment is driven by the private sector. Here is a list. Personal consumption expenditure, gross private domestic investment, government expenditure on goods and services, net export of goodsand services are some of the important factors rel… With higher interest rates, investment has a higher opportunity cost because you lose out the interest payments. If interest rates are 5%, an investment project needs to give a rate of return of at least 5% or more. In a recession, investment falls, and recover with economic growth. The second factor is how much loan you actually owe. Others (depreciation, wage costs, inflation, government policy) Main … This article throws light upon the four main factors to be considered while choosing securities for investment. Factors to Consider Before Investing One of your budgeting goals may be to have extra money that is not spent during the month. political turmoil) then firms may cut back on investment decisions as they wait to see how event unfold. After all, customers are always the king. Let’s take cryptocurrencies as an example, about a week ago Steemwas just around 80 cents, but as I am writing this article it is currently close to 2 dollars. If there is uncertainty (e.g. Finance in the stock research section). Evaluation – Confidence is often driven by economic growth and changes in the rate of economic growth. The shift in aggregate demand can be caused in several different ways. Marketability 2. The loan is another factor which you should look for while making an investment. Investors can decide how much of their surplus money can go to investments. Key Words: Behavioural Finance, Investor Behaviour, Factors Influencing Investment Decision 1.0 Background to the Study Investment decisions are made by investors and investment managers. Historically, the returns of the three major asset categories – stocks, bonds, and cash – have not … This has led to greater investment – though it can also affect the quality of investment as there is less incentive to make sure the investment has a strong rate of return. Risk tolerance. ... while … Summary – Investment levels are influenced by: Investment is financed either out of current savings or by borrowing. 10 Factors to consider before investing in any financial product. Also, even in recessions, some firms may wish to invest or startup. However, if you are among those that have been searching for answers to [things to consider before investing, factors to consider before investing in stocks, factors to consider when investing in a company, factors influencing investment decision, what information should you research before you invest, factors to be considered while making investment decision, things you invest in, factors … © 2020 FET Phase Business Studies — Powered by WordPress, Automated page speed optimizations for fast site performance, Poverty: Poverty is the state of not being able t, Unemployment: By definition, an unemployed person, Labour Disputes: Labour disputes occur when emplo, HIV and AIDS: The Human Immunodeficiency Virus (H, Inclusivity: Inclusivity is about giving everyone, Counterfeiting: Counterfeit goods are imitation p, Piracy: Piracy is the illegal use of someone els, Bootlegging: Bootlegging is the illegal productio, Crime: A crime is an act that is committed agains, Violence: Violence is the use of physical force t, In this new section, we will be looking at South A, Do you know how Corporate Social Responsibility (C, 9 Factors to Consider When Making Investment Decisions, List of Factors to Consider When Making Investment Decisions, Explanations of Factors that Must Be Considered Before Making Investments, Volatility / Fluctuations on Investment Markets, 6 Examples of Stakeholders and Their Importance in Business, Name 5 Components of Corporate Social Responsibility (CSR), Discover the Benefits of CSI to the Community, Human Rights, Inclusivity and Environmental Issues, Get More Business Studies Study Material Facebook, Download the 2020 Draft Time Table for Grade 12 Preparatory Examinations, Investing in Shares: The Advantages and Risks, Functions of the JSE (Johannesburg Stock / Securities Exchange), How to Deal with Diversity Issues in the Workplace, Describe the Differences Between CSR and CSI, Examples of Economic, Social and Cultural Rights in South Africa, Discuss the Disadvantages of CSR to the Community, How to Promote Social and Cultural Rights in the Workplace, Definition of CSR, Social Responsibility and Corporate Citizenship, Definition of Corporate Social Investment: CSI vs CSR. The gross national product or the gross domestic product (GDP) means the aggregate value of all the goods and services produced in the economy. Investing the right time is when you will really make a lot of profits. Factors concerning after construction of the structure. These ensure that your money is put to its best use, and that it yields the best returns with a minimal likelihood of incurring loss. (b) Dilution of Ownership : A high (D/P) Ratio recognises the dilution of ownership both from the standpoint of control as well as from the view point of earnings of the existing shareholders. In South Africa, the inflation rate has been around 4% for the past few years. As interest rates rise, fewer investment projects will be profitable. Consider an appropriate mix of investments. There are many factors that can contribute to an economy’s fall into a recession, but the major cause is inflation. Thus, the GDP reflects the overall performance of the economy. Thus, while deciding dividend policy of a firm, external investment opportunities should also be carefully considered. Recession is the slowing economic activity in the economy, leading to excess capacity and a higher level of unemployment and slowdown due to decrease in consumer spending caused by lower wages earnings and heightened uncertainty about the economic outlook. On the other hand, government subsidies/tax breaks can encourage investment. Tax is a compulsory fee that citizens must pay to the government. Summary – Investment levels are influenced by: Interest rates (the cost of borrowing) Economic growth (changes in demand) Confidence/expectations; Technological developments (productivity of capital) Availability of finance from banks. Accelerator theory The accelerator theory states that investment depends on the rate of change of economic growth. Our site uses cookies so that we can remember you, understand how you use our site and serve you relevant adverts and content. 4 Important Factors To Consider Before Investing. The marginal efficiency of capital states that for investment to be worthwhile, it needs to give a higher rate of return than the interest rate. Confidence will be affected by economic growth and interest rates, but also the general economic and political climate. Factor # 1. If a firm has started an investment project, a rise in interest rates will be unlikely to change the decision. While this is not a perfect metric (remember accounting charges can reduce earnings), it is one you should look at. Different investments have different tax rates. Typically, the capital investment factors process takes the following steps: Project identification: Finding an appropriate project for consideration. Long-term changes in technology can influence the attractiveness of investment. The first bad decision here was that I broke my “don’t buy real estate as an investment” rule. Interest rates can be outweighed by economic conditions. Also, investment may be required for the standard growth of a firm. A good investment must produce a good after-tax income. In China and Korea, the government has often implicitly guaranteed – supported the cost of investment. If the level of savings in the economy falls, then it limits the amounts of funds that can be channelled into investment. There is usually a direct link between risk and return on investment. But the wrong investment decision can cause grief and havoc. Now it is time for you to test your knowledge. Having worked on both the sell side and buy side of the investment industry, I’ve seen my share of analyst reports. (8), 4. Factors to consider before making the right investment decision By: Mukund Seshadri The problem with the 21st century seems to be that of having too many options. Make sure the target company is reporting earnings substantially higher than its sector (you can find these numbers in Yahoo! The investment period depends on the personal needs of the investor. Make sure the target company is reporting earnings substantially higher than its sector (you can find these numbers in Yahoo! The cost of labor can take a toll on the profits of a business. Marketability: The prime requisite of highly liquid and profitable investments is that they can be liquidated as and when required to replenish cash. However, it will make them think twice about future investment projects. In a period of low wage growth, firms may be more inclined to use more labour-intensive production methods. To invest at the right time you have to be very observant. Types of investments range from savings accounts and fixed-term deposits to property and shares on the stock market. Inflation is the continuous rise in the prices of general goods and services, which leads to a decrease in the value of money. Inflation refers to a general rise in the prices of goods and services over a certain period of time. Martin Pelletier: Being organised and knowing what to look for is also a … The return on investment should be expressed as the net after-tax income. You have to consider your investment property in context. Also, compare it to major competitors. This article throws light upon the top seventeen factors determining the capital structure. Long-term investments must be held for more than a year, while short-term investments are held for one year or less. A good investment should have a return on investment that is higher than the inflation rate. Although some investments offer low returns, they can be safer than those that offer higher gains. It is a huge investment, not just in monetary terms, but also in terms of the time involved in the transactions. 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