As a beginner investor, there are some vital questions to ask before investing. Most investors would begin by asking questions such as What would I invest in and what are the risks involved?
Every expert investor was once a novice in their now specialized areas, if you do not ask questions there is likely a chance of heavy risk occurrence.
It is not enough to limit your findings to research alone. You may find some things that need more clarification and this may call for someone to explain them better to you.
This is where you need to ask questions and not rely solely on your limited research understanding.
Asking questions could help you understand deeper the task you are about to handle more and give you more insight on how to manage it. Below are questions to ask:
1. What type of investment can work best for me?
You see, talents are different; sometimes you do not need to come up with any investment because you found out that a friend got wealthy through it. What works for your friend may not work for you because talents are different.
Taking a negative approach can ruin your investment instead, you can ask an investment advisor to ascertain for you what type of investment to choose. The advisor will understand your ability and help you out.
2. What are the risks to this investment type?
Ordinarily, you cannot start committing your capital all because you observed that a particular investment gives a huge return.
Notably, every investment has risk; therefore, you should ask what the risks associated with such type of investment are.
Acknowledging the risk beforehand will help you make the final decision to either go ahead or choose another type of investment.
3. What are your goals for this investment?
What are your reasons for investing? You cannot just be investing because you want to dedicate your money to a particular project. If you can figure out what plans you have then you are halfway ahead.
For instance, if you choose to invest in real estate then your goal would be to build generational wealth. Your future generation could partake in the profits and ownership.
Again, if you chose to invest in a fixed deposit, your goal would be to have something to rely on at retirement when you may no longer partake in active jobs.
4. How realistic are the rewards of this investment?
Every investment indeed has a reward but you should care to know how possible it is to realize this reward. The fact that everybody is getting rich through stock investment does not mean it is that simple.
It may take more than hard work; therefore, understanding what process you need to undertake is very necessary. If you fail to acknowledge this you may end up halfway and abandoning the investment
5. Can I diversify?
Diversification is a good way of managing risk and souring further with your investing. You should seek to know if your choice of investing could be easily diversified.
You can build a portfolio of stock, bonds, and mutual funds and manage all at once, using one to cover the loss of another. You need to learn portfolio management.
6. How many funds do I need to start?
Sometimes the amount of capital needed to start an investment is not always necessary as you can always start small and grow gradually.
However, in most cases, this issue of initial capital has always been the prior question when seeking to start investing.
This question usually scars people and discourages them from pursuing their goals in investing. That is why most people never start as they keep waiting for capital.
7. Can I overcome any lose
No loss is irrecoverable, what you just need is a good knowledge of your investment. You can always cover one loss with another if you try to diversify.
In a case where you cannot diversify then, there must be a way of gaining at least your capital and you may forfeit the profit.
This does not mean you should quit, you can start again but from the experience of the initial loss, you can make progress that can cover both.
8. Do I need an investment advisor?
If you are too confused about how to start and what next to do then you can hire an investment advisor. The advisor can walk you through the process of investing in any instrument or asset and also guide you to minimize risk.
9. Am I the type that can handle risk
If you cannot handle risk it means you may not handle money as well because everything that pertains to human life is a risk. Even life is at risk because people die at any time.
So, you need to understand that it is not taking a risk that matters but trying to learn from your failure to make success.
Having experience in a particular field of investment contributes to your expertise. Therefore the summary it does not to be afraid of risk.
10. What else do I need to know?
You will also need to register your investment if you are a shareholder and open an investment account – A brokerage account.
Develop a strategy that will guide your investment decisions and monitor how your investment from time to time.
People make many mistakes in the course of investing and most of these mistakes result from ignorance. Even if you attain investment courses online or hire an investment advisor you still need to ask questions.
You need to get enough clarification on the type of investment you choose. Even while investing, there is no limit to the number of questions you can ask.
Sometimes, it may seem to you that if you ask certain questions you may look stupid, No! you will not, but you are trying to gain facts and awareness, so go ahead and ask. Remember, the number of credible investments you make in life determines how successful you are. Asking questions before starting investments helps investors a lot