A fantastic investment strategy is one that is in line with the investor’s goals. It should provide all of the benefits of a successful investment. So please choosing an investment option you must consider some points, Let’s talk about those fundamental Features of Investment strategy.
Table of Contents
What are the Features of Investment Plan?
These are some of the major essential ingredients of a Investment Plan:
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Security of Principal Amount
One of the most important components of a successful investing strategy is the safety of the cash invested. The term “principal safety” refers to the protection of the principle against any potential loss as a result of changing circumstances.
Before making an investment, a detailed analysis of economic and industrial movements can ensure the safety of principal. It is obvious that no one can predict future economic situations with absolute certainty.
Extensive diversification is recommended to protect against various mistakes that may occur while making an investing selection.
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Diversification
The primary goal of diversification is to reduce the risk of capital and income loss. A diverse portfolio is less dangerous than one that is concentrated. Diversification is a term that describes a variety of approaches to financial commitments.
There are two forms of diversification:
- Vertical diversification
- Horizontal diversification
Vertical diversification involves investing in securities from firms involved in multiple phases of manufacturing (from raw materials to final goods).
Horizontal diversification, on the other hand, refers to investing in the securities of firms that are in the same stage of production.
Note:
Aside from the classifications listed above, securities can be divided into bonds and shares, which can then be further divided into kinds. Assets can also be categorised based on interest due dates, among other factors.
The easiest kind of diversification, on the other hand, is to own a variety of assets with a fair allocation in each.
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Liquidity
A liquid investment is one that can be changed into cash without incurring a financial loss. Investors can use liquid investments to assist them get through tough times. Only when stocks generate a sufficient return in the form of dividends and capital appreciation are they readily convertible.
Investors with a liquid investment portfolio can raise funds by selling liquid securities or borrowing money by using them as collateral. To assure liquidity and collateral value, the investor invests in high-quality, easily sellable investments.
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Regular Income
Investors put their money into assets that generate a steady stream of income. Regular income is a sign of a successful investing strategy. Not only should the earnings be consistent, but it should also be sufficient.
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Capital Appreciation
Capital appreciation is among the most essential investment principles. When the industry in which a firm operates is healthy, it thrives.
As a result of the link between sector expansion and capital appreciation, investors should invest in growth equities.
To summarise, the appropriate problem in the appropriate industry should be purchased at the appropriate moment.
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Taxation
The tax consequences of an investment programme must be properly addressed while preparing one. The quantity of income generated by an investment, as well as the tax burden imposed on that revenue, should be carefully considered.
Small-income investors want to maximise their cash returns on their investments, so they are wary of taking unnecessary risks.
Investors who are unconcerned with cash income, on the other hand, do not take tax consequences seriously.
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Compounding
The use of money for the purpose of producing income or capital appreciation is referred to as investment. To put it another way, current monies are sacrificed in order to get a bigger amount of future assets.
As a result, the investor should think about the future money’ purchasing power. To keep their buying power stable, investors should consider projected price level inflation as well as the potential for profits and losses in the investments they have available.
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Laws
The investor should only invest in securities that have been approved by the law. Investors who invest in illegal assets will face serious consequences. In addition to being happy with the legality of the transaction, the investor should be free of equities management.
The management of funds is entrusted to a competent authority in the case of investments in Unit Trust of India and Life Insurance Corporation mutual funds.
It will vary the pooled money based on the protection, liquidity, and stability criteria.
Conclusion
Investments always come with some kind of risk which cannot be fully avoided. However, you can minimize it by using these features.
This is all from our side regarding features of investment planning. Let us know your views about features of investment account in the comment section.
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Objectives of investment?
The main Objectives of Investment are to Secure your future & grow your money.
What is investment?
An asset or thing purchased with the intention of generating income or appreciation is referred to as an investment. The term appreciation refers to an asset's value increasing over time. When a person buys something as an investment, the goal is not to consume it, but to utilise it to produce wealth in the future. An investment always entails the current expenditure of some asset—time, money, or effort—with the expectation of a higher return in the future than what was first invested.
State any two features of investment?
Safety of the funds & liquidity are major two features of investment.
Importance of investment?
The major importance of investment are Generated Income, Wealth Creation, and Tax Benefits.
Features of investment decision
The Major features of investment decision are Safety of funds, Liquidity, Regular income, and Capital gain.
