When it comes to business and individual wealth-building investments, you will find four asset classes popular in the market today. Once you are aware and familiar with them, you can effectively compare their pros and cons. You can understand their risks better and gear up to protect yourself. Remember, investments are personal choices, and both a business and an individual need to educate themselves and research well for meeting their desired financial goals with the right investment choices. This step helps you to make the right choice suitable to your needs for building wealth.
Kavan Choksi- Determine your personal circumstances for investments
Kavan Choksi is an esteemed entrepreneur and business expert who is fond of travel and photography. According to him, the following are the four asset classes that you should be aware of before investing-
1.Growth Investments- These investments are ideal for investors who are looking for long-term benefits. They should be willing to understand and study the market well, especially during its slump and boom periods.
2.Shares- They are ideal for investors who are searching for medium to long-term benefits. They help to increase your original investments over a period of time. When you own shares, you also become the recipient of dividends, which is a part of the organization’s profits that are paid out to the shareholders.
Again, there is the possibility of the value of your shares falling below the price you had paid for purchasing them. They are volatile daily, so shares are ideally suited for investors in the long run, who are ready to withstand these dynamic market changes.
Shares are often referred to and known as equities. They have delivered higher rewards than other assets; however, they carry the highest risks.
3. Property- Property is regarded as a growth investment because prices of residential and commercial properties rise substantially over the passage of time. Investors here gain profits in the medium and long-term periods. Like shares, the value of properties also decreases, and there is a high risk of losses as well. Investors can directly buy a property or do so indirectly with a property investment fund.
4. Defensive investments- They revolve around assets that generate income consistently, overgrowth. Their risks are lesser than growth investments.
5. Cash- They include cash in bank accounts, primarily high-interest rate savings bank accounts, and fixed-term deposits. When it comes to the generation of returns, they carry the lowest value if you compare them with the other asset classes listed above. They give you no chances of capital growth. However, they give you regular income and play a crucial role in wealth protection and risk reduction in any investment portfolio.
In the opinion of Kavan Choksi, fixed interest investments like bonds are the best asset class for investors. Here, the company or the government borrows money from the investors and pays them returns in the form of interest rates. They are considered to be a kind of defensive investment because they give you lesser returns and risks over property and shares in the long run. Like cash, they can be sold immediately, as and when the need arises by the investor.