The investments with higher potential for return also have higher potential for risk. In investing, there's generally a trade-off between risk and return. Conventional wisdom says older investors who are getting closer to retirement should reduce their exposure to risk by shifting some of their investments from stocks to bonds. The closer you are to retirement, the more vulnerable you are to dips in your investment portfolio. Risk and Return for Investments Photo credit: © iStock/HAKINMHAN Here are five common factors that you should keep in mind to maximize potential returns on your investment. Therefore, you should consider carefully how your investment can perform based on different factors. Factors to Consider Before You InvestĪll investments carry risk. And depending on your time horizon and other financial needs, this is something you should keep in mind when calculating how much money you can earn. While you can use ROI to determine how profitable a financial investment can be, you should note that it does not account for how much time that asset will be held. Then you would divide this total by the cost of the investment and multiply that by 100. You can calculate the return on your investment by subtracting the initial amount of money that you put in from the final value of your financial investment. Return on investment (ROI) allows you to measure how much money you can make on a financial investment like a stock, mutual fund, index fund or ETF. How to Calculate Return on Investment (ROI) These are typically best for retirement and other long-term investments.
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