Factors Affecting Investment
Investment Return
People invest for a variety of reasons, the most important of which is to maximize the returns on the investments. The returns on various assets must be assessed on a regular basis. Depending on the size of an investment, an investor may need to restructure their securities portfolio.
Inflation
To increase the returns on an investment, each individual's investment must exceed the current inflation rate. If inflation exceeds an individual's return on investment, the rate of return after considering inflation will be negative. To make investments more efficient, investments must overcome inflation.
Liquidity
Benefits of inflation include having to prepare cash for emergencies and quickly changing investment strategies to generate high returns. Any news can provoke a knee-jerk reaction to the stock market and lead to buying opportunities.
Tax advantages
Tax incentives are an important aspect of an investment. If an investment is not made properly, taxation can wipe out the return on an investment. There are some heavily taxed investment opportunities. Other investments generate tax-exempt or low-tax returns.