How to Get More Out of Your Investment?by Sakshi Kharbanda Financial Consultant
Return on investment is essentially the interest you'll be earning by depositing your money in some kind of asset or investment scheme offered by any bank or non-banking financial company. The return on investment is calculated taking into account both the financial costs and the opportunity costs of not investing your money elsewhere or even for transactional purposes. Besides the usual fixed deposit interest rates comparison, a lot of other factors come into the picture when you are looking to invest in some profit-making venture. For any rational consumer then, the goal would be to maximise his yield from investments without having to compromise on any of the other factors. The following points should be kept in mind while you are looking for ways to invest your money in a worthwhile venture and maximize the returns from the same.
Tips to get more out of your investment
Enlisted below are the points on how you can benefit more from your investment.
Take a calculated risk
Investing can often be termed as betting against the unknown. You don't know whether the project or the cause that you're devoting your time and money behind would even be successful in the long run. But to kickstart a project or a financial plan, you have to invest. Further, you cannot reap the harvest unless you sow the seeds and investing is a lot like that. But a wise decision would always be to invest in a project or asset that has reliable backing and support and has the makings to become successful. Even projects near completion or short term projects are more trustworthy, viable and profit generating than the long term ones. Further, in case you want to diversify your asset portfolio, try to invest in both government and private bonds. Government bonds are usually reliable and have zero chances of your money falling through. That means, you'd always get a guaranteed interest from the same, although that would be quite minimal. On the other hand, private bonds yield higher returns but have greater risks associated with them. That is because private stock prices are more vulnerable in the credit market.
Choose the company/asset smartly
Small-scale companies and banks generally have higher interest rates than nationalised companies and banks. Even private banks and companies offer more than these nationalised banks. On the other hand, most of the private lenders or companies can afford to hike interest rates of their short and medium term bonds extending for only 2 to 3 months because they can maintain their business and profit from the same as well.
Do not overreact to market fluctuations
This point is quite notable. The market can be sensitive to fluctuations, booms and slumps in the economy which would be reflected in the prices of the stocks and bonds. This will impact the overall demand in the money market and demand in the commodity market. It can also cause constantly changing tastes and preferences. But for a rational consumer, creating and maintaining a well planned Investment Policy Statement or IPS is quite important. It will chart out your investment goals, the risk taken, asset allocation and portfolio summary. Then instead of letting the market dictate your moves and investment decisions, you can proceed according to plan and real greater rewards.
Reduce investment costs
Investment costs matter. If you are investing more money into a particular financial plan that would yield substantially lower profits than your initial present value of the investment, the plan wouldn't be worth investing in. To calculate this, the net present value of any investment and the discount factor, determined by prevalent market interest rates, expected interest rates in the future and customer confidence are required. Further, you'd always look forward to investing in projects that require comparatively less principal amount since then the risk associated, in case the project falls through, would be less.
Pay attention to taxes
You might not want to hear this but if you invest in a big project and earn sufficiently from the same, chances are taxes will be levied on your earnings leaving you with a really sordid profit margin. Hence, while investing it is always advisable to judge the kind of returns you will be getting off the project, the taxes applicable on the same and your present value of the investment. Only then, if the desired profit matches your calculated profit level, invest in the project otherwise don't.
Try to evaluate the interest rates and predict the situation
If you are looking forward to investing in fixed deposit bonds, then going through the fixed deposit interest rates and comparing the rates across various banking institutions is quite important. Going for higher interest rates is always advisable and there are special concessions for the elderly as well. Then profit-earning scopes are also enhanced.
Now that you have gone through each of these points thoroughly, you know the areas to look out for or focus on while investing in any kind of asset. Returns of investment can be maximised if you take risks. But along with that, you also need to chart out your investment plan beforehand, judge the pros and cons and then invest in the fixed deposits or bonds.
Reference Source: https://ts1584203.medium.com/how-to-get-more-out-of-your-investment-c402981bb6f9
Created on Jan 20th 2022 04:23. Viewed 208 times.