Investing and Planning
The idea of investment is as old as wealth creation itself. From time immemorial, man has always looked for ways to increase what he has; this is solely what investing is all about. It is the allocation of resources, most times, money, in expectation of getting income and profit. Investment is multifaceted and includes investment in ideas such as a business idea, or investment in assets such as real estate properties purchased with the intention of selling at a profit.
The core idea behind the investment is the expectation of profit, and this is what differentiates investment from any other spend. When it comes to assets that one can invest in, the sky is limit, or better still, there are almost no limits.
One thing that accompanies investment is a risk. They are two sides of the same coin. The spectrum of risk, however, is a wide one too with low risk usually equating low returns as well. Thus, it is almost an unimpeachable doctrine in investing that the higher the risks, the higher the returns, and vice versa. Low-risk investments include the likes of Certificate of Deposits. Other investments include land, artworks, shares and equities, bonds, etc.
When it comes to investing, the return on an asset depends heavily on the type of asset in question. For instance, some stocks pay dividends every quarter, bonds generally pay interest the same way too, a real estate property usually generates Rental income monthly, etc.
Another critical thing that you must take note in investment is price appreciation. This is the increase in the value of the asset over time. It is essential to consider this as much you will consider the periodic returns because, in the end, your total returns is periodic income plus price appreciation on the asset.
Planning is a core part of any investment. The sole purpose of planning is to create strategies that will guide your investing. The investment planning process starts with identifying financial objectives and goals and matching this with financial resources. With thousands of investment opportunities available, it is easy to be distracted or even worse, confused as to what to invest in. But when there is a clear goal in mind, you can easily find investment opportunities that match your goals. For each goal, there should be an investment idea to actualise the goal, and it is only when you have this in place that you can make a guided and informed decision.
However, you should understand whatever is planned is not set in stone; it is merely a roadmap which can be subject to a change in light of new circumstances. The same way a driver will take a detour to avoid a fallen bridge in front is how an investor can change strategy when conditions change.
Most people sometimes see investment as speculation. This belief is fostered by a lack of planning in many people who invest. When there is adequate planning, investment becomes a calculated risk.