5 best characteristics of a good investment

5 best characteristics of a good investment
April 10 14:23 2017 Print This Article

To know and understand the characteristics of an investment, first, we, need to know what is an investment? Investment is basically the allocation of money in expectation to earn future benefits out of it. The benefit which we earn out of our investment is known as the return on investment. The return can be dividend, interest, growth in investment income etc. The people who invest are known as investors and they generally believe in low-risk low-return and high-risk high-return policy. Before investing, the investors should know the 5 excellent features of investment which makes it profitable over time. Ignoring these core characteristics can make your investment useless and can lead you in severe trouble. Apart from these 5 characteristics there are some features which you can look for such as; attractive valuation, high dividend, and appropriate risk level etc. Moving on to the 5 best characteristics of investments, which are;

Low cost – Investment should be based on low-cost funds and exchange traded funds. The future investment performance would be better if the expense ratio to the fund is low. By keeping an eye on the cost of investments, investors can save more amount of money and can get higher returns on their investment.

Tax efficient – It is the second essential characteristic of investment. An investment should have a low turnover to be tax efficient. Funds with high turnover are usually tax inefficient and are not recommended. Apart from tax efficient investments, Investment Company can also practice certain activities like tax loss harvesting, right type of investment in right type of account in order to help their clients to earn higher returns.

Diversified- Being diversified is a very important character of a good investment. A good investment in a diversified fund can actually reduce your stock specific risk. For instance, any fund with 1000 stock position can barely get noticed. More stock holdings can eliminate the stock specific risk. Any risk which would not get you expected return is not worth taking.

Liquid- investments should be liquid so that it can be easily converted into cash when you need it the most or when you wish to convert it. The advantage of having liquid investment is that, that you are always aware about its price and value in the market. Investments which are locked up for years and are not liquid are very inconvenient to people.

Simple- Investments which are simple to understand and are transparent is what people want. Complicated investments have high hidden fees and are not in favour of the buyers.

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Jones Steven
Jones Steven

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