Investment Mistakes: Failure to Conduct Research

Taking an investment decision can be highly challenging, especially for a new investor. However, professional investment research can provide much-needed guidance. The process of analyzing the performance of various financial instruments such as stocks, bonds, debentures, and mutual funds in the market to get a holistic view of the company’s performance is known as investment research. The research also helps in estimating future performance and price fluctuations. In other words, comprehensive investment research bridges the information gap between investors and relevant data.

There are some factors that an investor must consider before making investment decisions:

• Return on investment — The main objective of every investment is to get a return on investment. It is measured as the gains made by an investor after deducting the cost of investment. It should be the net after-tax return and should be higher than inflation.
• Risk appetite — Every individual has a different risk appetite. Usually, the higher the returns, the higher the risk. Investment research can help understand the risks associated with investing in a particular stock or bond and accordingly helps in taking a decision.
• Budget — Individuals have limited capital allocated for investments. They should be well aware of the efficient allocation of capital to generate maximum returns. Investors should also budget to safeguard from unexpected costs and losses.
• Time horizon — The investor must be aware of the investment period, and the expected return on investment. Returns on investment may vary based on the period of investment. They should decide their investment period as per their personal needs/goals.
• Liquidity — Liquidity refers to how fast the shares or investments can be converted to cash. The right mix of liquid financial instruments in the portfolio always safeguards investors in case of emergencies.
• Inflation rate — A good investment must always generate returns higher than the inflation rate. As the value of money decreases due to inflation, returns will be profitable only if they are at a higher rate.
• Dynamic markets — Investment markets witness frequent swings or fluctuations. An investor should consider the fluctuations in national and international economic trends to understand how these could affect his investments. Usually, higher market volatility is associated with higher investment risk.

Therefore, planning investments is a complex task, and a fair amount of strategizing is required. Professional investment research can pave the way for an investor to take smart decisions by providing all relevant information. Investment research is done by an investment analyst who factors in various elements that influence the price of an underlying asset and shares information as well as advice on whether to invest in it. Hence, it is advisable to take recourse to professional investment research before making investment decisions.