When talking about investing, as a general rule many doubts arise. The fear of losing money always prowls the investor’s head. To prevent this from happening, before investing your first dollar you should ask yourself some questions. Specifically, 5 questions. They are very simple and their answers will determine which is the best for you. So read the myInvestmentBlog and get know what you should be aware about before financing.
1. What is your current financial situation?
The first thing is to be clear about your current economic-financial situation. If you do not have a mortgage, personal loans or credit card debts, and you also have an emergency fund to face unforeseen events, then your economy is healthy and it is a good time to finance.
On the contrary, if you have no savings (or these are scarce) or capacity to save more; or if debts devour an important part of your income every month, then perhaps you should consider cancelling those liabilities and saving a little more before funding.
2. What do you intend to get by investing?
Depending on what your future goals are, this will be the horizon of your funding. If you want to finance, thinking about enjoying a good holiday in three or four years, the financial product you choose should be relatively liquid.
On the contrary, if you are young and your goal is to reach retirement with a good background that allows you to live like a king, then your time possibility for saving is 35-40 years, you can assume greater volatility and the potential return on your investment will be much higher.
3. How much risk are you willing to take?
Every financing carries a risk. However, there are investments which are safer and a few of them are more risky. Normally, the greater the risk you are willing to assume, the greater the potential gains. Low-risk funding are also investments with low profitability.
You must be clear about your risk tolerance and cross that data with your objective (point 2). For a conservative investor who wants to recover his money in a few years there are few interesting investment products. However, if you want to see your money grow for very long term the risk you could absorb would be much greater, as long as you dare to assume it.
4. How much are you willing to pay to manage?
At this point there are two very important factors: your time and your money. If you have a lot of free time you can dedicate it to learn and thus manage your financing yourself without the help of an advisor. In this case the price of managing your investments is zero.
On the contrary, if your time is short, you have no choice but to pay an expert to manage your finances. If you accept advice, look for an advisor who will charge commission which is on based on the evolution of your portfolio: if you win, he wins; and if you lose, he doesn’t charge.
5. Before doing investment make sure which type of funding is more profitable to you? As there are different plans in market so only choose the best one.
The answers to these questions will determine which one is best for you and in which one you should not waste a single minute of your time. An ideal investment scenario could be that in which the good emergency funds are already managed.