- With £10,000 investment, a person can build a healthy portfolio of assets
- A purpose makes it very easy to pick up the assets from a pool of investment options
- Higher the years of investment, higher will be the cumulative return on the corpus
A sizable amount of money lying in your bank account, other than the sum reserved to meet the periodic expenses, develops a strong feeling to park it somewhere else in order to get better return as compared to the rate of return provided by most of the banks and financial institutions on the savings account.
Keeping your monthly savings in a bank account, or directing them towards the financial instruments advised by your banking partner needs no difficulty in the decision making as almost all the possible banking products that are designed to offer better returns over the savings account are risk-free investments, typically having a low risk profile.
With a sum of approximately £10,000, a person can build a healthy portfolio of assets including a handful of equity components, fixed income assets, as well as a few debt products. Investing has always been an activity of discipline, irrespective of the money involved. Clearly, big-ticket investments require a proper mechanism as with large sums of money, it becomes an obligatory requirement to remain on track with the predefined objectives, mitigating the prospective risks in a timely manner.
Also Read | Can You Get Rich with Penny Stocks?
In order to maximise the gains on investment, an individual is required to keep a good track of several things that can effectively improve the decision-making while selecting the assets, as well as the particular picks. We take a look at four different aspects that can lead to a better and informed decision making before a person shortlists the possible options for investment.
Define your objective
Identifying the objective of investment materially helps in converging the disarranged thoughts. A predefined purpose makes it very easy to pick up the assets from a pool of financial instruments. The very goal of your investment can substantially help in aligning decisions with the right investment options.
The setting up of a definitive investment objective also includes the profiling of an investor that comprises of putting a quantifiable number to the expected rate of return, the percentage of error or the potential diversion from expectancy you are equipped to absorb without hampering the daily lifestyle requirements.
Furthermore, an objective established at the very beginning of investment can assist the individuals in sticking to certain regulations with regard to the quantum of money that can be allocated to different asset classes according to the risks associated with different financial instruments.
The time period for which you want to remain invested becomes the second-most crucial thing if you are looking to maximise the gains on any size of the corpus. Higher the number of years of investment, higher will be the conclusive cumulative return on the corpus.
If a person is able to define the time period of investment, he can effectively decide to choose between the risky assets too.
Also Read | Is it worth buying 1 or 2 shares of a stock?
For instance, a person who has just started investing in stocks, debt products or any other market tradable assets can choose high risk assets as in the initial years an individual is more equipped to absorb the losses, if any. Moreover, people who are investing for a longer duration can look to include more equity options that control the market share in the respective industry as these very assets can provide high returns in the long-term, as they have outperformed every other asset in history when larger stretches are taken into consideration.
A person starting with a nominal sum of £10,000 can have ample opportunities to diversify with a usage of a good mix of assets including the equities, and debt instruments in a proportionate manner. A small portfolio designed with adequate diversification can emerge as a balanced portfolio in forthcoming years by adding the same amount of assets in a relatively similar measure.
Building a diversified portfolio not only helps to spread the risk of total assets, but it also assists the individual in identifying potential mistakes. With this, a person can make sure that the same mistakes are not repeated when the size of the portfolio becomes huge.
Minimal management fee
A person starting with £10,000 can try to include those assets that have negligible management fees that include the brokerage charges, terminating fees, foreclosure charges, unscheduled withdrawals. A high asset management fee can hinder the prospects of growth as investors may refrain from periodic modifications if they are incurring high charges on buying and selling of products.