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5 Factors That Affect Your Investments


Investments can be great wealth building tools that you can use to multiply your savings. But unfortunately, all of the research and counseling in the world can’t necessarily guarantee a high rate of return. Whether you’re an expert or a novice, it’s important to keep in mind that there are certain uncontrollable factors that will always have an impact on your investments.

1. Current Events

World events like wars, natural disasters and elections can have both direct and indirect effects on the stock market and your savings. Keeping abreast of what’s happening around you is important if you’re a participant in the investing game. A small occurrence can cause a major shift in social consciousness and a political decision can have a real-time effect on the supply and demand of certain products or companies you’ve invested in.

2. Interest Rates

The United States Federal Reserve System combats inflation by adjusting interest rates periodically. When rates rise, so do borrowing costs. It’s a good idea to keep up with the Fed’s decisions and choose your investment vehicles carefully.

3. Taxes

5 Factors that Affect Your Investments

Taxes lower your real returns. Luckily, planning ahead can reduce the taxes you owe the government. Holding on to stocks and other investments for more than a year, for example, will lower your capital gains tax. Having the right mix of stocks and bonds in your portfolio and selling off low-performing investments can also work in your favor during tax season.

4. Unemployment

A lack of jobs can lead to a drop in consumer spending. And when consumers keep too much money in their pockets, the economy suffers. Even if you have a job and you’re doing well, your investments will be affected by the country’s overall spending patterns.

5. Commodity Prices

5 Factors that Affect Your Investments

Fluctuating commodity prices have a huge impact on the earnings of public companies and investors. The prices of lumber, oil, cotton, wheat, coffee and gold depend on supply and demand. When you are looking to invest in a certain sector or company, it might be helpful to take a look at the relevant commodity prices and keep track of major changes in the markets.

Related Article: What Are Commodities?

Bottom Line

While there are many factors outside your control when it comes to investing, staying informed and knowing what’s happening in the markets can help you make better decisions that can maximize your returns.

If you don’t have the time to devote to staying on top of the markets, consider hiring a financial advisor to help you. A matching tool like SmartAsset’s makes it easier to find an advisor who meets your needs. First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to three registered investment advisors who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.

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