• 06 Apr, 2024

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Investment Dilemma in Uncertain Economic and Political Situation

 

Human beings are always striving hard to earn their bread and butter. In ancient times, when they depended on nature's available resources, they put effort into finding those things to fulfill their needs. Once these basic needs were fulfilled, they would stop their efforts. Later on, they learned skills such as growing crops, raising animals, and making things. Since then, they have been trying to acquire excessive resources in the form of money, animals, metallic reserves, and property, etc. The objective behind all these efforts is to achieve a strong financial position in society. In the old agro-based economy, there were few investment options available to people. They would invest in animals, purchase agricultural land, or convert it into precious metal ornaments. After industrial revolutions, things changed, and more investment options were explored by people after new inventions. Different new businesses evolved, and formal banking setups were available for people to invest their excess money. In recent times, there are enormous opportunities available for people to invest their money, but due to the complex nature of the market, business operations, economic situation, risk factors, and expected rate of return, investment decisions are not easy to make. We will discuss each factor one by one to analyze these factors in detail.

 

Complex nature of the market

In today's world, we are not just dealing with local markets. Except for a few products and services, most markets expand globally. With intense local competition, it is challenging to survive by serving only domestic buyers. There are many online product and service providers, and their numbers are increasing daily. In this situation, investment decisions are very difficult, especially for people with small savings. If they try to start an online setup, it will give them the advantage of not needing to invest heavily in stock. However, people nowadays expect prompt replies to their queries, which may not be possible for them due to their full-time professional engagements. This is why the success rate of new online startups is very low, and margins are squeezed due to competition.

 

Complex business operations

The word "business" attracts people, and they often think that it involves displaying products and services. However, starting a business is not as simple as people perceive it to be. There are many things behind a startup. For example, if someone wants to start a small French fries stall in countries like Pakistan and India, they need to consider many official and unofficial hurdles. The small French fries stall holder has to deal with at least nine plus official and unofficial agencies to run their business affairs, including the Municipal Corporation, Food Department, Labor Department, etc. If such a small setup's operations are so complex, imagine the complexity for medium and large setups. Even in countries where these things are not a big deal, most businesses have complex production and management processes that are not easy for a layman to handle.

 

Risk factors

Investment decisions are all about taking risks. There are three types of investment categories: low risk, medium risk, and high risk. The more risk a person is willing to take, the higher the potential return, and vice versa. However, the chance of losing the investment in high-risk investments is also a reality. It depends on the individual's nature and their willingness to invest in a particular venture.

 

Expected rate of return

One of the most important things on the mind of every investor is the rate of return they expect from their investment. People expect a specific rate of return because they have their own future objectives to achieve. For example, someone may want to build a house in the future and has a targeted period in which they want to fulfill it with their investment returns. Therefore, decision-making in available options becomes complex, considering the associated risk factors with each investment plan.

 

Economic situation

The economic situation has a significant impact on investment decisions. A decision that may seem best in normal economic conditions could turn into a nightmare during a recession. Government economic policies and political instability can lead an economy towards recession, affecting businesses and putting investments at high risk. This complexity makes investment decisions challenging, especially for those who want to make sensible choices.

 

Summing up

After a brief discussion of the above factors, one can realize how difficult it is to make investment decisions while considering all these factors simultaneously. It is challenging even for individuals with relevant education, let alone those with limited or no knowledge of investment-related matters. Investing in conventional bank products may not be a better idea, especially in countries with high inflation rates. Investing in these products may not increase real earnings significantly. Some people prefer to invest in the commodity market, while others choose mutual funds or the stock market. Each option can be feasible under different scenarios. For those looking to maintain their purchasing power, saving money in the form of gold and other precious metals may be a better option. For those willing to take risks, investing in mutual funds and the stock market could be a viable option, but it requires basic knowledge of these products and markets. Researching and reading relevant material in newspapers and magazines, as well as seeking advice from experts or professional organizations, can help individuals make informed investment decisions.

 

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