Questions to Ask Before Making Major Investment Decisions
Before making any investment decisions, it is worth taking a step back to make sure in your own mind that you are making a choice which is the right one for you. While we can’t pretend to know your individual circumstances, your tolerance for risk, your financial goals for the future etc, we can provide some general advice which applies to a wide range of different people and personalities. So, let’s go into some more detail about what you should consider before making any major investment decisions.
Have You Set Up an Emergency Fund?
The first rule of investing which is worth bearing in mind is the fact that nothing is guaranteed. You need to be prepared to take a few risks. But inevitably, there are going to be times when these risks don’t pay off, and these are the occasions that you need to have a clear financial Plan B in place. This starts by creating an emergency fund with enough savings to give yourself some breathing space should you suffer a financial misfortune. Ideally, you should have around six months’ worth of savings in place to give yourself the time that you require to get back up on your feet once again.
Have You Paid Off High-Interest Debt?
No clever investment strategy which you can take is going to have as big an effect as paying off your high-interest debt, so this is what is worth focusing on to begin with. Otherwise, the profits that you are making from your investments are only likely to be paying off the interest on your debt, and you will find yourself running in quicksand. Clear off your high-interest debt, and you have a strong base from which you can start investing.
Have You Drawn a Personal Financial Roadmap?
Before making any big financial decisions, it is worth taking a step back to do a personal analysis of your own monetary situation. This is especially true if you have never really made a financial plan in the past. As well as figuring out your goals, you also need to evaluate your tolerance for risk. You can do this by yourself, but it may help you out to get the support of a financial professional as well. When you create your plan or roadmap, you have something which you can keep referring back to time and time again.
Have You Considered a Mix of Investments?
Rather than putting all your eggs in one basket, you could instead consider making a mix of investments to protect against any significant losses. The three traditional main types of investment are stocks, bonds and cash, but technology is starting to change this as more and more people look to buy Bitcoin and other cryptocurrencies. By investing in some different asset categories, there is less of a chance that everything will take a downturn at the same time. It is worth remembering that if you are saving for a long-term goal like retirement or college, many experts think that you need to have more risk in your portfolio to make the type of returns that you are looking for.
Have You Looked into Rebalancing Your Portfolio?
Going back to the asset categories that we have just mentioned, you will want to ensure that your current portfolio doesn’t overemphasize one or more of your asset categories. Rebalancing your portfolio is a common course of action, and many investors think that this should be done on a regular basis like every six to 12 months.
Have You Thought About Fraud?
Unfortunately, when it comes to an industry like financial services, there are bound to be fraudsters who are looking to target inexperienced investors with ‘once in a lifetime opportunities’. Always remember to ask plenty of questions and ideally, speak to an unbiased source before you channel your money into anything that you are unsure about. Also, read up on some of the most common current scams, so that you know exactly what you are looking out for.
Major investment decisions should always be made with plenty of thought and questioning. These are just a few of the most common queries which you should put to yourself before launching an investment portfolio or making any big decisions which are going to impact your financial situation in any way. With a solid plan in place, you are much more likely to achieve the type of success that you are looking for in hitting your financial goals.