Investor Profile part.2

Liquidity:

In this case you need to know how fast you need to convert your investment into cash. A highly liquid investment means that you can get your money at any time. In a low liquidity investment, it can take time to find a buyer and complete the sale process. And, some other investments can be "illiquid", that is, you will not be able to obtain your resources until a certain date or specific event.

 

Return of investment:

ROI is calculate by subtracting the initial value of the investment from the final value of the  investment which equals the net return, then dividing this new number (the net return) by the cost of the investment, and, finally, multiplying it by 100.

 

Diversification:

Is the best way to reduce investment risk. Diversifying means "not putting all your eggs in the same basket." Imagine that you have € 10,000 to invest and you use it all to buy shares in a single company.

 

Also you have to know:

1. Investment horizon.

Represents the time during which you want to invest your savings or assets.

Short term: less than a year

Medium term: 1 to 10 years

Long term: more than 10 years

If what you want is to save for a trip abroad that you want to do in a year, then your investment horizon is short-term. Saving to put down a house in five years is an example of a medium-term investment, while investing to retire early from working life is usually an investment with a long-term horizon.

2. Profitability.

To calculate the most suitable performance for you, you have to decide if you want to put your money to work and produce it or if you prefer to leave it 'asleep', with peace of mind, just without losing its value over time. If you want it to work for you and you don't need the income in the short or medium term, you can consider investments that do not guarantee performance from one year to the next, such as stocks.