Everyone has to start somewhere and being a new investor is by no means a bad thing. Some even say coming into the game with a fresh mind could have its benefits. That being said, never go in to an investment blind; you should understand an investment well enough to explain it to somebody else. To make things easier, pose these following questions to yourself to check you have everything covered.
How does this investment work?
Do you understand the investment well enough to explain it to somebody else? You should be well versed if you are considering putting your money into an opportunity. If you can’t explain it clearly, do more reading and contact a professional financial advisor for assistance.
What do you want to achieve?
Your goals will depend on what you want from this investment. Some people use investing as a secondary income, others want to protect their capital and others simply want growth. Outlining what you want to achieve could help you decide if an investment is for you.
What is the associated risk of this investment opportunity?
You should have a clear idea of how much risk you are willing to accept in your portfolio. Consider how this investment would fit in with your comfortable risk zone.
How much return do you expect from this investment?
What do you expect financially from this investment? Is your target realistic?
How long do you plan to invest?
Most investments are classed as short, medium or long-term opportunities. You will need to know which category your investment fits in to and whether it’s appropriate to your timescale.
Are there any costs with this investment?
Make sure you are aware of any costs associated with buying, holding and selling your investment. Also remember to check if you will pay tax on any money you earn.
If you have any doubts prior to pursuing an investment, we highly recommend that you contact a professional financial adviser before making any investment decisions.