Monday 24 December 2018

The decision to invest | Purpose | investment process

As in the earlier writings regarding investment; Understanding the basics, types and benefits of that Investment is investing to one or more assets owned and usually timed a long with the expectation of profit in the future. Parties who make investments referred to by investors.

investment processInvestors generally can be classified into two, i.e. individual investors (individual investors) and institutional investors (institutional investors). Individual investors are composed of individuals who perform the activity of investment. While institutional investors are usually made up of insurance companies.

Basically the purpose of undertaking investments is to make some money.

More specifically, according to there are several reasons why someone investing, among others:

  1. To obtain a better life in the future. A wise Person will think how to improve his life from time to time or at least trying how to maintain the level of income that exists now in order not to diminish in the future.

  2. Reduce the risk of inflation. By investing in the possession of company or other object, one can prevent themselves from the risk of a decline in the value of the property or rights of hers due to the influence of inflation.

  3. The urge to save on taxes. Few countries in the world a lot of policies that are encouraging the growth of investment in the community through the granting of tax facilities to the people who make an investment in certain business fields – fields.

The Basic Investment Decisions

As for the Basic investment decisions consists of:


The main reason people invest is to gain an advantage. In investment management profitability of investment known as return. A very reasonable thing if investors demand a certain level of return over the funds that have been invest. The expect return of investors from the investment is doing is compensation for the opportunity cost (opportunity cost) and the risk of a decline in purchasing power due to the influence of inflation. In investing needs to differentiate between the expect return (expect return) and the return happens (realize return).

The expect return is the rate of return anticipate investors want to come. While the return happens or the actual return is the return that an investor has acquire in the past.

Between the rate of return expect and actual rates of return obtain from investments made investors may just be different. The difference between the expected return of risk should always be consider in the investment process. So in addition to invest, pay attention to the level of return, investment should always consider the risk level of an investment.


a direct correlation between the returns with the risk, that is: the higher the return, the higher the risk. Therefore, investors should maintain a level of risk with the repayment of the balance.

The time factor

It was an important period of the definition of investment? Investors are able to infuse capital in short-term, medium-term or long-term. The selection of actual investment period is an important thing that shows the expectations or the expectations of investors. Investors always selects the length of time and the returns that can meet the expectations of returns and risk considerations.

The investment process

investment process is a set of activities that result in the purchase of real assets/securities. The investment process revolves around the investment decisions that relate to maximize wealth investor.
Steps in the investment process:

  1. Knowledge about risk and return on investment.

  2. Know the investor's attitude towards risk. Each investor should be willing to accept the risk of the investment that sometimes in real assets or securities, and can identify the combination of risk and return is acceptable. In other words, before accepting the risk of investment, investors must be on a logical financial position, and should be ready to use reasons that make sense to the process of making a decision.

  3. Knowledge of every type of securities/assets available for investment, including the expected return and the risks associated with the type of assets/securities.

  4. Select multiple securities/asset that can give a refund and acceptable risk based on the needs of particular investors.

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