Investment Basics: Three Main Factors Affect Your Investment Decision

Many people have asked me questions something like "Is ... good investment?" or "What do you think about ... as investment? Is it good?". My answer is always "It depends...". As every experts say about the investment, there is ABSOLUTELY NO one size fits all investments for everyone. Some investments are good for certain group of people but not really good for the other group of people for various different reasons. Yet, in my opinion, all of these factors are very closely tied to solid financial education.

Investment Objectives

Depending on person's investment objective, choice of investment vehicles will totally change. Ask following:

Investing in short term or long term?
What kind of return are you looking for?
What kind of risk do you want to take?

General Economic Outlook

Ask yourself about general economic outlook in short term and long term. Specifically, ask following:

Inflation or deflation in the future?
Market condition by sector (Certain sectors are doing well, some don't or even some sectors are in bubble during this economic time)
US economic condition in near and long term future.

Political Factor

Government new policies and other economic policies by central banks will affect your investment choice in big way. Specifically check the following:

Do they create new regulations that might affect your investment in near future?
Do they initiate more bail-out or other QE programs (or similar) in near future?

Those 3 main factors are intertwined with each factors. In other words, each factor will affect other two factors. Therefore, we need to think all of those at the same time in order to find out your specific investment situation. This will require solid financial education. In my opinion, this is the requirement for every single person in this world to learn financial education in order to survive and thrive in this chaotic financial condition.

Although this seems hard at first, it starts to get easier and easier once you understand the basics. Once you understand it, you will never ask question something like "Is ... good investment?" since you will know exactly what to do no matter what situation economy turns out (even you can see the probable outcome before it happens). In next blog, I will introduce the resources and books that I personally use in order to gain enough financial knowledge to understand those three factors. Stay tune!

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