Golden Rules Of Investment - Growth, Returns Together With Liquidity

Golden Rules of Investment

Before nosotros choke along let’s revise the pregnant of words viz., rules together with investment inward context of this article.

1. Rules are sets of for sure principles or atmospheric condition that guide, direct, refine, control, together with regulation something or someone.
2. Investment is a continuous class of action(s), for exploring the diverse financial alternatives to maximize the wealth.

Golden rules of investment used for its evaluation are depicted below.

The principal principles or golden rules of investment are every bit follows:

1. Growth is an appreciation or heighten or an increase inward the marketplace position value of the investment.
2. Returns hateful an increase inward the revenue or income earning capacity of an investment.
3. Liquidity is the realized value or sale value of the investment made every bit on today.

Now let's briefly utter over each golden dominion of investment.

1. Growth

Growth is an appreciation or heighten or an increase inward the marketplace position value of the investment.

An increase inward the value is i of the positive factors of a practiced investment.

While evaluating the growth of an investment, next points shall last considered.:

1. Growth tin cease last measured inward damage of an increase inward the marketplace position value of the principal amount invested. That is, an increase inward the initial investment made.
2. It tin cease too last measured inward damage of marketplace position demand or marketplace position analysis for the investment.

2. Returns

Return on an investment is the revenue or income earning capacity of it.

Investment needs to last categorized based on its high revenue earning capacity, stable revenue earning capacity, together with depression or nothing revenue earning capacity.

While categorizing investment on its revenue earning capacity regulation of render is to last kept inward mind.

According to the regulation of render on an investment,

“High returns volition send a higher risk, together with depression returns volition send a lower risk.”

In other words, higher upward regulation states that whatever investment giving maximum returns is by together with large rattling risky together with the i that gives minimum returns is unremarkably safer together with bears less risk.

Following points are considered piece evaluating returns on an investment:

1. Returns tin cease last measured inward damage of an increase inward the earning capacity of the investment made.
2. It tin cease too last measured inward damage of hereafter commitment made to the investor.

3. Liquidity

Liquidity is the realized value or sale value of the investment made every bit on today.

Liquidity is the amount of sale-considerations for an investment, provided sold every bit on today.

Higher sale consideration over the investment made volition last considered for its evaluation.

To evaluate liquidity of an investment, next points shall last considered.:

1. Liquidity tin cease last measured inward damage of realized value after the sale of an investment.
2. It tin cease too last measured if the demand is to a greater extent than for the investment, together with render for the same investment is short.

Evaluating an investment

For instance, see next intelligence to sympathise how to apply golden rules of investment to evaluate together with examination your investment.

Let’s assume, yous accept initially invested $10,000 inward or hence ’XYZ’ investment scheme, plan, policy, project, venture, etc.

Now yous are interested to detect out, where your investment conclusion is based on the golden rules or not. For this, yous must showtime evaluate your investing conclusion yesteryear finding valuable answers of the next 3 of import questions:

• (Q.1) What is the divergence betwixt the electrical current marketplace position value of XYZ investment (as of today) when compared alongside the starting or initial investment made? ($10,000).
• Answer: If the introduce marketplace position value of XYZ investment is to a greater extent than than $10,000 (actual amount initially invested), together with then yous tin cease conclude that your investment is showing ’growth’ together with vice-versa.

• (Q.2) What is the income or revenue generating capacity of XYZ investment?
• Answer: Here, yous must banking concern jibe whether XYZ investment is giving a high render / stable render / depression or nothing return. The categorization of it must last done based on the pct of returns. That is, high pct of income or revenue earned yesteryear it implies higher render together with vice-versa.

• (Q.3) What value (amount) XYZ investment volition fetch if it is realized or sold today inward the market?
• Answer: Here, yous must examination whether the XYZ investment tin cease last easily realized or sold inward the marketplace position or not. If it is sold inward the marketplace position today, together with then what value or amount, it volition fetch must too last constitute out. High realized or sale value of it volition imply that it is highly-liquid together with vice-versa.

Once yous accept successfully evaluated XYZ-investment based on your stimulate answers collected alongside honor to the higher upward 3 questions together with then yous tin cease choke along farther to compare them alongside investment-decision given inward the next table.

The 3 golden rules of investment viz., Growth, Returns together with Liquidity tin cease last applied to whatever type of investment.

If these rules are applied wisely together with alongside due care, together with then an investor tin cease never permit his or her investment larn bad.

Conclusion

From higher upward discussion, next conclusion tin cease last derived:

• The higher upward discussed parameters / atmospheric condition / rules tin cease last applied to whatever type of investment.
• The golden rules assist to test, verify together with conclude whether the investment conclusion is a practiced (right) i or bad (wrong) one.
• These parameters request to last evaluated properly together with promptly correct from the introductory phase of the choice of an investment, together with too used later on at regular intervals in i trial investment is beingness made.
• This evaluation procedure based on the golden rules of investment overall helps an investor to stimulate upward one's heed the efficiency together with status of his investment.
• Such a constant review volition assist an investor to avoid the direct a opportunity attached to his investments.
• Furthermore, this volition too assist an investor to explore the novel opportunities to maximize the income earning capability of the invested funds.
• If evaluation is done properly together with regularly, together with then no investment volition e'er plough into a bad one.