Key Considerations when selecting an investment instrument

Your Investment Profile/Strategy

Before making any investments, be it equities or any financial products or investment instruments, you need to understand your investment profile.

  • Investment Timeframe (how long)
  • Your risk appetite
  • Your investment strategies and asset allocation plan
  • How much time you have to review your investments
  • Your investable amount
  • Your expected ROI/investment goals

Risks involved in the investment instruments

In any investment instruments, there is always risks. Even cash is not spared as there is inflation risk. Understand the risks associated with the investment before committing. Make calculated risks and optimize the Sharpe ratio.

Expected ROI in the investment instruments

What is the expected ROI from it and how what is the timeframe.

Time needed to review the investment instruments

In every investment instruments, we always need to review it periodically. Some more, some less. But one thing that is finite is our time. Invest in something that you can manage.

Manager of the investment instruments

In most investment instruments unless you personally manage it, there is always a person or organization that administers/manages it. You want to put your money to someone that you can trust. Someone that has high integrity. You rather put your money to someone with high integrity and low competence than a high competence and low integrity person. One of the most important factors that Tom Gayle uses is that he assesses the integrity of the management of the company that he is going to invest in. You also want to place your money to someone with good track record.

Commission and Management Charges of the instruments

I had invested in products that gave marginal returns but charges me with management fees. In the end, I paid more management fees and the returns were no better than bonds.

Fundamentals of the Investment Instruments

Invest in something that you know comfortably in. You must understand how does the investment product works and what are the factors that will appreciate or depreciate the value. For equities, understand how the sector works and what is the company business model and growth plan.

 

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