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Consider Risk Factor before Making Investment Decision

30/07/2018

investment-real-estate

Nowadays, the biggest problem that we face is to have too many options whether it comes to buying a mobile phone, a car or even an investment option. It is not wrong to say that real estate or property is considered the best and most reliable investment vehicle in Pakistan. Therefore, you will find every second Pakistani citizen parking his saving in real estate options across the country in order to live a stress free life.

Though money does not guarantee a stress free life but you can still invest and reap good benefits. And it is good to start as earlier as possible to make the most of it. Following points help you make a better and well-informed investment decision.

What is the purpose of investment?

Money is a tool to perform a task in order to generate desired results. If you have money it does not mean you will invest it somewhere and get the desired item. You must have specific purpose in view before parking your money in an investment vehicle. For instance, you have bought a plot in order to support your child' s education in future and it seems to be a wise decision as well.

However, when the time comes and you see that the cost of education is almost Rs2 Million and the value of plot is around Rs6 million. Is it a wise decision to sell this plot for your son' s education? You may say no but the property owner has no other option.

Experts suggest not to forget that investment in property lacks liquidity so one should not invest his all money in one asset class.

Understand the risks

The biggest mistake that most of the people make while investing in real estate is knowing little or nothing about project. They think that real estate always gives hefty returns, you can never be at loss or if someone is doing well, he will also do good. Remember, these assumptions do not always work. The asset itself is not bad where you are investing but your lack of knowledge may make you lose money. Always talk to the real estate expert about the project and find all the on-ground facts about the project when it comes to making an investment decision.

Risk-Return Parity

You must understand the returns of the investment against the risks involved. Remember, no investment can offer maximum return in a short term but it may guarantee a steady return. You will have to decide seeing the market situation. Never play blindly or take risk due to someone else. Make your research and be ready to invest wisely. A risk-return parity depending upon the goals and finances should always be maintained.

Investing your hard-earned money without taking precautions may land you in a bigger problem.