Going into an investment is no small decision. You want to have some idea of where the firm you invest in might go, what kinds of resources they have to go there, and what confidence they have in their ability to reach their goals. After all, it’s your money, and you don’t want to go throwing it in a hole.
For this very reason, it’s essential that you have a few questions at the ready before making an investment. Ask these questions, and the investment decisions you make may turn out sounder and more profitable.
1. Do I Know How to Pay My Taxes?
The good part about an investment isn’t necessarily watching your money grow. Taking it out and spending it will also be part of your reward for successful investing. But, you’re going to want to watch how much you spend and how much you save. The IRS will be wanting some of that money- and a good chunk of it.
Make sure you know the tax landscape around capital gains before you start throwing your hard-earned money around.
2. Does This Homogenize My Account?
Having a diverse portfolio is step one of investing. From day one, successful investors learn that having a diverse range of investments, spread across a number of industries, is one of the keys to having an account that trends upward. When a wave of bad days washes across one industry, you want to have a few more that are still gaining. So ask- does this help me diversify?
3. How Confident Am I in Growth?
A growing investment- those two words go together just as essentially as cold beer or hot apple pie. That’s why you need to be 100- no- 200% sure of eventual growth before investing in anything. If it won’t return, don’t waste your money.
4. What’s My Overhead?
When you’re dealing with investments, you’re going to want to have a little room for defeat. Of course, success is the great motivator when it comes to investments, and everyone wants to make money. But having a little bit of a buffer is great. Bend, don’t break, and your account will be able to weather any financial storm that might come its way.
5. What About the Legal Aspects?
So, the product looks great, and the company even better. They’ve got a strong plan, good resources, and seemingly, a lot of confidence and competence. But when the government comes knocking on the door, will they know what they’re doing?
Make sure any products you invest in are registered with the SEC and other state agencies before making your investment.
6. Will It Help Me Reach My Goals?
Ask yourself- what are my goals when I’m investing? Do I want to make money quick, or leave it for the long term? What kinds of returns do I want to see, and what do I want my portfolio to look like? These questions and more will help you decide whether or not an investment is right.