How To Make Wise Financial Investment Decisions

Not all financial investment decisions can be considered wise. There are many ways to invest your money and it is imperative to take time and make the effort in finding a good investment that will result in positive returns. Ultimately, the main purpose of any investment is to make positive ROI. No individual in their sane minds will ever splash their money in an investment they are fully aware is going to fail. But how exactly can an individual make a wise financial investment decision?

A wise financial investment can be considered one which is suitable for your specific circumstances or situation and one with a higher probability of bringing in positive returns. Examples of such investments include mutual funds, stocks, bonds, real estate, business investments and derivatives such as binary trading.

Three Common Wise Investment Plans

The following are the three types of investment commonly considered as wise investment plans. You should, however, note that they will not be appropriate for everyone.

  • Mutual Funds
  • Bonds
  • Equity Stocks

Before anyone decides to put money in any of the above-mentioned investments, it is imperative for them to make a careful consideration on the asset they wish to invest in. For instance, long-term investors are well off with equity stocks.

In the same manner, investors with low-risk appetite and who desire greater assurance that they will profit from their investment should consider bonds as a wise financial decision. In this case, government bonds or treasury bills would be the most appropriate investment because of the guaranteed returns.

Mutual funds, on the other hand, would be a great choice for the investor who desires higher rates of returns with low risks of loss as the case with the stocks. However, such investor must work with a skilled mutual funds manager with a stellar track record for success.

Three Common Unwise Investment Plans

The following are the three common unwise investment plans based on the high level of risks as well as the uncertainty associated with them.

  • Cash loans
  • Binary options
  • Other types of derivatives

The popularity of binary options have gained in the past few years is immense and this is mainly due to the fact that they can be traded online and the fake illusion of them being an easy way to make quick cash. [pullquote]However, a binary option is a very risky investment and the failure rate is very high.[/pullquote]

However, most of the binary options brokers make the possibility of great returns seem so attractive that most uneducated investors find themselves being sold into them with professional sales pitches and end diving in them giving much thought. The end result is them flushing away their hard earned cash without ever seeing any worthwhile results.

Cash loans are also not a good idea due to the high failure rates which originate from the high risks involved. The lenders offering cash loans never ask for any substantial collateral, and as a result, they leave themselves exposed to huge losses when they give their money to individuals who are unable to service the loans.

In as much as derivatives are legitimate investment assets, they come with higher level or risks. It implies that losing your investment when you consider the derivatives is very easy. Investing in the derivatives should thus be preserved for individuals with higher risk appetites and can afford to lose much money.

A financial investment decision can only be considered to be wise if it can give a positive return and it is in tandem with the investor’s goals.

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