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What are some factors that affect investment decisions?

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Quick Answer

Factors affecting investment decisions include an investor's appetite for risk, the amount of surplus money he wants to invest and his investment time frame. Factors that affect an investor's decision to invest in a foreign country include the country's rules on foreign investments and its policies on repatriation of profits.

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Full Answer

An investor should understand the past performance of the relevant assets before making his investment decisions. He should consider his tolerance for risk based on his responsibilities and his personality before investing in assets that carry substantial risk. His decisions on how much money he wants to invest each month or the amount of a lump sum should be guided by the amount of money he expects once his investments mature. He should use this amount to determine whether he should invest in equities, bonds or other securities and assets.

An investor who wants to diversify his investments to include foreign holdings must consider factors, such as the country's national economic growth rate and the liquidity of its stock market. He must consider a country's capital gains tax policy and the integrity of its dispute resolution system. He must confirm that the country protects the rights of foreign investors and that its central bank holds adequate currency reserves.

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