1.14 Factors Influencing Investment Decisions

How are investment decisions made?

The important considerations for any individual investor before making an investment decision or after making the investments are as follows:

• Rate of return expected.
• Risk appetite or tolerance.
• Tax benefit (deduction in the taxable income by virtue of making the investment).
• Marketability (ability to find a buyer when we want to sell the asset or the demand for the asset).
• Liquidity (ability to sell the asset and raise money).

Example:

To make an investment decision in the stock market you have to be really aware of the factors affecting the stock market, which we would cover in this course. Apart from this, your age, earnings, savings and risk-bearing capacity will influence your investment decisions. Another important factor is the time horizon or period of time you can invest. All these affect your investment decisions.