There are many variables that investors consider when making an investment decision. But two variables Expected return and market conditions are the most important in the decision-making process. The reason for the importance can be summarized as below:
Expected Return: – The expected return from the investment is the most important factor and variable to which any investor is concerned. If the investors find that the expected return from the investment would be according to his needs and risk, the investor will invest. Every investor invests only for returns or capital gain that again is another form of return. If the indictors are favorable in terms of risk and returns, investor will invest else will not invest.
Market conditions: – After returns market conditions second most important variable that affect the investment decisions. It is the market in which the investment will be invested and only a favorable market condition can provide the expected return from the investment. If market conditions are favorable investors will consider investments. Market conditions include present and future economy conditions of the market, the industry future and the company’s ability in performing according to the investor’s expectations. If the market conditions are consistent with the expected returns from the investment, the investor will invest otherwise may differ investments.