In an economic outlook, investment is the purchase of goods that are not consumed instant but are used in the future to create wealth. An investment is essentially an asset that is created with the intention of allowing money to grow.  In another words, an investment is an asset or item accrued with the goal of generating income or recognition.

In finance, an investment is a financial asset bought with the idea that the asset will provide income assisting or will later be sold at a higher cost price for a profits making.


The following are the basic problems affecting  investments:

LIMITED CAPITAL: One of the biggest challenges that investors face is having limited capital available to invest. This is only compounded when certain financial instruments are too expensive. After 2020 pandemic, many firms and banks were short of liquidity so had to cut back lending. Banks were very reluctant to lend to firm for investment. Therefore despite record low interest rate, firm were unable to borrow for investment. 

OVER DIVERSIFICATION: This challenge is one that is almost always self-inflicted. Many investors feel as though they need to invest a bit in everything to shield them from risk. However, over-diversification can significantly stunt your portfolio’s growth.

INCREDIBLE VOLUME AND SPEED OF INFORMATION: Perhaps the most discourage confronting investors is the sheer speed and volume of information. In the past, solid information about publicly-traded companies was hard to come by outside of the annual and quarterly reports. The Wall Street Journal and a limited number of finance-related publications attempted to collect business news and disseminate it. But this news moved to the greater public at the speed of print. In order to be reported, a story had to be significant; even then, it had to be written up, printed, and delivered.

Now, even obscure companies can produce a constant stream of information from the daily price fluctuations in the stock, announcements, and posts on dedicated message boards. When there is so much information available at any given time, it can be difficult to identify what is really important.

BAD TIMING: Is most problems affecting investment. Some investors simply go into the market right before a financial downfall. This has caused investors to lose money before making any.  However, this risk can easily be mitigated  a strategy where you invest into the market bit by bit and over a long period to mitigate larger fluctuations in the value in your portfolio. 

MICRO-ECONOMIC OBSTACLES: Micro-economic obstacles to investment, arising when inadequate public governance, a challenging business environment and deficiencies of the public administration at different levels discourage public and private investments.

INABILITY TO SEARCH FOR THE RIGHT RESOURCE: The difficulty of finding the right resource is tied to the confront of there being too much information available. Some investors, fail to find good resources in the crowd? To be clear, having lots of choices and easy access to free resources is an overall win for the modern investor. It is hard to avoid being overwhelmed by the range and variety of opinions out there.

GOVERNMENT POLICIES:  Government policies make investment more difficult for investors. For instance, strictly planning legislature may discourage investment.

WAGES COSTS: If the wages costs are rapidly grown, it may create and incentive for firm or individual to try and boost labor productivity, through investing in capital stock. In a period of low wages grown, firms may be more inclined to use more labor intensive production methods. This also hinder firm not to invest.

LOW INTEREST RATE: investment is financed either out of current savings or by borrowing. Therefore investment is strong influenced by interest rates. High interest rates also give a better rate of return from bank. With higher interest rates, investment have a higher opportunity cost because you lose out the interest payment.       

 Thanks for reading 


Post a Comment