Each and every day, more people become aware of the importance of investing. They know that investing is a great way to create wealth and prepare themselves for the future, however, only a few people know the right way to invest successfully.
To be successful as an investor, you need to understand certain elements. There are risks involved in investing and a good investor wants to minimize the risk and make more profit. That is why I want to share with you the four keys to successful investing. Let’s get into it!
Key #1: Investment Returns
What is an investment return? This is the profit you make at the end of the day on any investment. It is important to understand this if you want to succeed when investing. It is also known as the Return On Investment or ROI. It is either expressed as a percentage or ratio of the profit to the investment cost. That is the ratio of the total amount of money you gained to the original amount you invested. It is calculated to show whether you are gaining or losing on an investment.
When you invest your money you give up certain benefits of using the money right now hoping to get benefits from it later. The profit you get from investing is your reward for not spending it but instead placing it into a growth vehicle. Therefore, you need to understand some concepts of investing to make the maximum profit at the end of the day.
You should take note that a successful investment should generate a high return. At the same time, the risk and the investment cost should not be too high. Remember that the first reason why you want to invest in the first place is to make a profit. If the risks are too high it is possible to lose all your money.
The profit you make from an investment is a function of the risk that is involved in the investment. Investment with low risk usually generates low investment returns while investment that comes with a higher risk has the potential for more profit. For example, treasury bills are usually safe and have less risk. But the return on investment of treasury bills is low when you compare it to other investments with high risk such as stocks. Stocks have a higher average return and also come with higher risk.