Is Your Investment ‘What-If’ Covered?

In the world of financial planning the What-If Calculation should be a big deal, especially when it comes to planning for retirement. The What-If Calculation is a way of assessing an investment’s viability under various conditions to determine its present net value. Other terms that may be used to come to the same conclusion are “worst-case scenario,” or “sensitivity” and “stress” testing. The bottom line is always the same outcome, as market conditions change what is the net value to the investor in today’s market?
This concept of financial planning is very easy to understand and because so, is often overlooked or not fully understood. If either is the case with an investment, the viability analysis, while performed over a range of possible market fluctuations, may First Time Home Buyer Guide Pdf not give an investor an accurate description of the investments performance. Or to put it another way, a poorly understood What-If Calculation could mislead one into thinking an investment is an asset, when in fact it is a liability and vice-versa.
Someone may think, “What-If calculations only matter if you invest in traditional methods like Stocks and Mutual Funds.” Not true. Every investment must perform a What-If calculation including commodity investments such as energy, currency, food and real estate.
To illustrate, assume a commodity investor in energy, currency or food is prepared to enter the market. Without a proper range of calculations including historical data, market fundamentals, current events – political, weather, etc. – and the investors working-capital as well as risk tolerance determine a proper entrance into the market. A calculation that overlooks or does not fully understand market fundamentals, of sugar for example, would not know if a put, call, straddle or bull call spread best suits the investor in terms of cash-on-cash return, risk and time.
Now consider real estate. An improper What-If calculation may put an investor into a negative monthly cash-flow liability whereas, if done properly, would but the same investor into a negative monthly cash-flow asset. This advanced strategy when done correctly makes the difference between making a 2-3% annual return versus a 30% annual return. Market conditions, investor assets and liabilities, depreciation and capitalization and other factors determine a properly calculated and understood What-If Scenario.
If you would like more information about properly assessing your portfolio and diversification, or for minimal Leaving Furniture When Selling House risk investment opportunities secured by real estate contact New Horizons Real Estate & Consulting online at .

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