Five Important Questions to Ask Before Investing

Arwind Sharma By Arwind Sharma, 14th Jun 2018 | Follow this author | RSS Feed | Short URL http://nut.bz/34i3d1-9/
Posted in Wikinut>Business>Investment

A good investment is also key to surviving difficult times and ensuring financial stability. However, a lot of consideration goes into coming to the wisest investment decision.

Few Questions to Ask Before Investing

A good investment is also key to surviving difficult times and ensuring financial stability. However, a lot of consideration goes into coming to the wisest investment decision. One needs to be informed about the type of investment and the associated risks, among various other things.

Here are five critical questions one must ask before investing to make the best investment decision possible:

1. What is your Investment Objective?

The objective of your investment must be clear to you from the very beginning. There can be some objectives, from wealth creation to income flow after retirement. Once the goal is recognized, it is easier to determine the type of investment best-suited for the task. For example, assured returns on fixed deposits (FD) allow you to purchase an asset while mutual funds can be an excellent way to save for the future. The objective will enable one to determine how much capital will be needed to achieve it and what challenges does the current income pose to it. Fixed Deposit gives a high-interest rate of 8.40%.

2. What is the Investment Tenure?

The investment due date is also referred to as ‘investment horizon’. The ideal way to decide an investment’s tenure is to determine how long until the objective needs to be met. Investing wisely would require time to time evaluation of the tenure and determining the monthly contribution capacity.

3. What Risks are Involved?

Inflation, currency fluctuation, returns, interest rates – there can be plenty of risks involved in an investment. In fact, a risk-free investment is a non-existent thing. From mutual funds to endowment insurance plans, all carry risk. So, it is better to examine the risks involved thoroughly before investing and go for the one which presents the maximum chance of a healthy return.

4. What Charges and Commission are Involved?

A sales agent or a relationship manager will always hard-sell a particular option. Know that he or she may be the more significant beneficiary there instead of you. So never rush into an investment before enquiring about the agent’s commission or any charges that may be levied on you. Ask what part of your contribution will be deducted from the commission or fees, and what role will determine the returns.

5. How to Exit the Investment?

You may require your money for various reasons before the investment reaches its maturity, be it to sort some financial crunch or to re-invest in a better instrument. Logically, your money should be available to you at all times, but some investments have conditions such as exit loads, lock-in periods, withdrawal limits, etc. Rather than receiving a shock during a financial crunch, inquire about your exit options beforehand only.

All investment options carry the potential to provide rich returns but a person needs to evaluate them all carefully first. Given that everyone’s contribution and requirements differ, so do the advantages of the return. These five questions form a good starting point to begin that evaluation.

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Investment, Investment Tips

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author avatar Arwind Sharma
Arwind Sharma a passionate writer on finance and closely associated with financial companies. He is still busy in discovering time-efficient finance schemes. To know more about Loan against

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