Investment in the shares market is a very crucial decision and requires thorough knowledge and understanding of not only the financial market but also of some of our personal needs and abilities. Before we actually make the decision to invest in the financial market we need to make a check on few things that would impact our investment decision, and these are:

So prior to investing in the shares market we need to make sure that in addition to the amount we plan to invest, we have money that is sufficient enough to cover our living expenses and at the same time protect us from the unexpected.
Let us first discuss the investment life cycle of an individual.

Individuals in the age group of 23 - 40, that are in the early-to-middle years of their working career are considered to come in this phase. As the individuals in this phase have a small Net Worth (the amount by which the individual's assets exceed their liabilities), they are motivated to fulfill their corresponding short-term goals such as paying off loans (e.g. educational loans), purchasing a car or a home. However, as the individuals in this phase have a relatively longer career life ahead of them giving them the opportunity to recover from the losses they might incur in their investments, they have the ability to go for high-risk investments.

The individuals in this phase are past the middle stage of their working life and into the later stages. Since half of their career life has passed, their ability to invest in high-risk investments has gone as they have a smaller career life left ahead of them to make up for the losses they might incur by investing in risky assets. Moreover, individuals in this phase are confronted with more important short-term goals such as children’s school and college fee and long-term goal such as retirement plans. Although individuals in this phase would have a sufficient income to cover their living expenses and would also have accumulated good amount of money as cash reserve to take care of the unexpected, still the individuals in this phase would prefer to make moderately risky investments as they would not want to take very high risks that would put their current wealthy nest (that they have obtained through hard work) in jeopardy.

The individuals in this phase are those that have entered their retirement period. Such individuals would invest in less risky investments as, apart from their accumulated wealth (which they prefer to save to gift to their children and grandchildren in days nearing the end of their lives), they do not have any career/working life left ahead of them to make up for losses they might otherwise incur by investing in risky investments.

What we can summarize from the above discussion is that the longer is an individual’s career life, the longer is his available investment time horizon (time available for investing in assets such as stocks, bonds etc.) and the greater is his ability of taking risk and making risky investments.