There are so many different reasons why someone might be looking to start making investments, whether it’s to increase their cash flow or learn more about the trading and investment markets. No matter what the reason, most people will tell you one thing, and it’s that they are doing it in an attempt to increase their original ROI through a good investment.
But with investments being relative – what is seen as good for one person might not necessarily be good for another – essentially everyone is looking for the same thing. A good investment can be the jewel on your crown if you make the right investment decision. In order to find out what a good investment looks like for you, you should first set out to identify your goals and determine your investment budget, from here, you can start making steps to the investments you wish you make.
What Is A Good Investment?
A good investment is one that is well-suited to your individual goals. It should also have an acceptable risk tolerance level, whilst ensuring that it increases your net worth. But, as mentioned, a good investment is subjective and what is deemed good for one investor might be considered a bad investment for another. This is why it is so important to assess and work out your investment risk tolerance, as well as overall goals.
Although there is no such thing as a “guaranteed” good investment, you can learn to recognise the traits and characteristics of investment opportunities and use these to weigh up whether, to you, they would be a good investment decision. There are also things known as good short and long term investments which are dependent on your individual level of risk.
Short Term Risk Investments
Short-term investments are more suitable for financial goals that have a time frame of 12 months or less. Indicators of a short term investment include:
- High percentage probability of earning
- Access to funds within the specified time frame
- A strong guarantee or level of probability that the initial investment made won’t be lost
Long Term Risk Investments
Usually, long term investments will have a time-span of five or more years. This then allows investors to have more time to recover from their initial investment and any market fluctuations. Signs of a good long term investment include:
- They don’t require more initial investment than individuals can afford to lose
- Easy to buy or sell
- Arent unfairly valued or undervalued
- Come with reasonable fees
How A Good Investment Works
Whilst there is no way to know for certain whether an investment is going to be a good one, this risk is all part of the investment game and is something that you should consider before parting with funds. There are many indicators as to whether an investment opportunity will be good or bad for you, and there are even some indicators that will give you an idea as to whether it will increase in value. As the investment market is constantly changing and evolving, this means that it is also consistently monitored and analysed, meaning that it is possible to get insights towards its performance.
What Types Of Good Investments Are There?
Almost anything of an increased value can be seen as an investment opportunity these days, however, this doesn’t always mean that the investment is a good one. From things such as stocks and shares, to fine wine and autograph collections, there are many forms of investment which you can consider, but some are better than others and this tends to be the traditional methods of investment, such as stocks, bonds and real estate.
What constitutes this is, essentially, the ultimate return on investment and the level of probability that you will earn a return. Let’s take a look at some of the different types of good investments.
Referred to as the bread and butter of investing, shares are a very well known form of long term investing. With stocks, you are purchasing a portion of ownership within select companies. Buying shares in a company could mean that you profit in two different ways: through capital gains, should you go on to share your shares for more than what you originally paid, or through dividends, which is where a portion of the profits are distributed out to shareholders.
Shares are traded on the stock exchange and investing in shares can be highly profitable and rewarding, as the growth of the company can then result in high returns for you. However, this form of investing also brings with it a level of high risk, as the share prices can be volatile and affected by fluctuations in the market and economic conditions.
Real Estate Investment Trusts (REITs)
Real estate investment trusts, or REITs, are entities which allow investors to own, even potentially, operate real estate that generates income. Investing in a REIT can allow you to have an indirect investment in property, without the requirement to own any actual real estate. Types of property could include residential property, commercial properties such as shops, offices and shopping centres or specialist property which includes hotels.
REITs are under the requirement of having to distribute the majority of any taxable income to other shareholders, which is what makes them an attractive investment option for those perhaps looking for long-term and regular income, very similar to that of dividend stocks. REITs also offer the possibility of capital growth should the value of the property increase. As with all investments, however, REITs come with risks and this includes the risk of potential property value decreases and income reductions. If you are interested in real estate investment, then be sure to speak to a commercial property agent for more information and recommendations.
Crypto is a relatively new market, but it is one which has gained a lot of traction, and earned some investors a lot of money, since its inception. Cryptocurrencies represent a form of digital or virtual currency which makes it virtually impossible to counterfeit. There are many different types of cryptocurrency, but the most popular types include Bitcoin, Ethereum and Dogecoin.
Investing in cryptocurrency can be highly enticing, and this is down to the potential of gaining high returns. However, cryptocurrencies sit on a highly volatile market and value can fluctuate significantly, meaning that it should be considered a long term and high risk form of investment. Investors can, and have, lost all of their investment if the market value drops below a certain level. The world of cryptocurrency is also one shrouded in controversy – it is currently a market which is unregulated, which then leaves investors unprotected and open to scams and fraud. Cryptocurrency is not yet considered a legal tender, so investors should navigate the market with great caution.