Answer to Question #244620 in Finance for Tshwanelo

Question #244620

1. What is an investment?

2. Which factors one should take into consideration before making an investment?

3.Advantages and disadvantages of an investment.

Expert's answer

1. An investment is a purchase that is completed with money that has the potential to produce income or a profit. Things that naturally lose value over time and with use are not investments.

2. We consider five key factors when undertaking investment analysis for our clients.

These are:

1. Compliance

2. Liquidity

3. Volatility

4. Cost & Value

5. Return

3. Advantages - There are a variety of funds covering different industries and different asset classes available. Some of the advantages of this kind of investment include advanced portfolio management, dividend reinvestment, risk reduction, convenience, and fair pricing.

Disadvantages - Disadvantages include high expense ratios and sales charges, management abuses, tax inefficiency, and poor trade execution.

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