Important Factors in Personal Investment | Free Essay Example

Important Factors in Personal Investment

Words: 571
Topic: Business & Economics
Updated:

Introduction

When making an investment, it is important to look at a number of factors in order to ensure that the returns are within the investor’s expectations. In many cases, people make investment without a proper analysis of the underlying forces. When this happens, it is possible for the investment to be lost very easily. In this paper, the researcher will try to help Mary and John make a wise investment decision.

Factors Mary and John Should Consider Before Deciding On This Investment

Mary and John should look at a number of factors before making their investment decision. The first factor when making long-term investments is age. Mary’s age makes it appropriate for her to invest in Toy Builders because this is a long term investment. She will benefit from it for many years to come. However, at 70 years, it would not be recommendable for John to invest in this business. It may take long before this investment can start giving out impressive returns. In the meantime, John may have financial problems.

The second factor that these two investors should put into consideration is alternative sources of income. Mary already has $ 200,000 in savings. She has a good job and can afford to save 100% of her bonus. This makes her the right investor for Toy Builders. She has an alternative source of income and, therefore, can afford to wait for this business to pick without having financial problems.

However, the same is not the case with John. His savings are meant to cater to all his financial needs. If he invests his savings in this business, then he might suffer financially if the returns from Toy Builders fail to flow as fast as was expected.

The third factor is the ability to take risks. When making an investment, it is a fact that there are risks that may not be avoidable. Before making an investment, one must determine if he has the capacity to manage the risks that are associated with the investment. Mary is only 30 years.

She has about $ 200,000 in her account besides her regular salaries. The investment only requires $ 100,000, which is half her current savings. It means that this is a risk she can financially afford. However, John may not recover from the risk of failed investment because he has already planned how he should spend his savings. For that reason, John should avoid this investment.

The attention that an investment need is another important factor that cannot be ignored. An investor must determine if he can dedicate his time and attention to the project as may be demanded. This investment opportunity does not need a lot of time or attention from both Mary and John. This means that it is safe for both of them in terms of time and attention.

How Toy Builder Fits into the Discussion

Toy Builder fits into this discussion because it offers both Mary and John an opportunity to expand their wealth instead of having it in a bank account. If the two make the right decision, their investment can double. However, this has some risks, especially if the business becomes unsuccessful.

Summary

Based on the above discussion, it is recommended that John should avoid investment because of his delicate financial situation and age. On the other hand, Mary can consider investing in the business because she is young and has a strong financial base.