Which is the best idea for a vacation - beach side, a hill station or a pilgrimage? Obviously, you would here divergent views from people you ask this question to, as individual preferences differ. No one vacation is the 'best' - some enjoy a trip to Goa, while others may prefer to go to Nainital.

A similar dilemma is faced when people try to discern the 'best' asset (stock /mutual fund/bond/real estate) to invest in. At the risk of sounding trite, one would have to reaffirm that there is no single correct answer to this! Individual preferences of risk, liquidity, ability to monitor, cash flows, etc determine the 'best' asset.

Further, during the peak summer of May or the monsoon of July, you might not think of Goa as a great alternative, while it might appeal in December. Thus, there are periods of time when individual options become more or less palatable. Similar is the case with investing - you need to be broadly cognizant of the state of the asset class you are investing in.

Finally, even if you preferred a hill station, but were suffering from asthma, your doctor may advise you to not risk the rarefied atmosphere of a hilly area and go to a beach instead. This is the kind of discretion you must also exercise in investing - it is easy to get carried away by a person selling an investment product; but it is important to do a sanity check against your own financial health, which is a function of your cash flow and asset situation.

After some consideration, you have decided that a hill station is the place you want to visit and your doctor has no objections either. If you lived in Mumbai and only had the Saturday/Sunday off, would you go to a Nainital? If you did, you would probably end up spending 36 hours travelling to watch 15 minutes of sunset! Worse, if you go delayed in travel, your plan might be a total washout.

It would be a better idea to go to Matheran, which is a three-hour drive, even if it were less scenic. You could always reserve Nainital for the longer Diwali vacation. Similarly, in investing, the time horizon is very important in choice of instrument. Investments of less than 3-5 years in duration are best not done in equities or real estate, while in the 15-20 year time frame, these are the best instruments. Instead, you often find people dabbling in equities churning every few months, while keeping only PPF and other debt instruments for the long term.

So, keeping in mind availability of only two days of time and preference for hill station, you now want to make the final choice of a hill station near Mumbai to visit. Now suppose you go to a person who owns a hotel in Matheran to ask him the best location - do you think he will recommend Mahabaleshwar as the ideal choice? You would have to go either to a person who has seen both these places, or someone who otherwise has collected this knowledge.

You would want to know about the availability of good hotels and transport facilities; not to mention approximate cost of the trip. It is here that either detailed independent literature or a seasoned traveller can help you with the nuances of each of these places and either make the recommendation for you, or atleast help you make a well-informed choice.

Not surprisingly, investing follows similar lines. If you ask a salesman of company X the best product, you would not be getting prizes for correctly guessing the recommendation he would give! Only an independent third party � one who ideally doesn't depend on any of these companies for a living, can give you the best advice. Yet, in the absence of time and choice of alternatives, we often end up buying a financial product simply because it was 'sold' to us; many a times without consideration of the our needs, preferences and financial health detailed above.

The author is Director, PARK Financial Advisors, Mumbai. He is an MBA, Indian Institute of Management, Ahmedabad.