Before you invest, do these five things

So you are at that stage in your life where you want to start investing some of your hard-earned cash. Congratulations! on a wise decision. After all, having your money under your sofa is a terrible idea because you could lose it to tragedies of life like burglary or even fire. 

Many companies offer investing services, but you should consider these five things before you hand over your money.

In this article, we will discuss five things you should do before you invest your cash.

 

Have a goal

One of the fundamental principles of investing is to never invest without having an objective or a goal. What’s your plan? Why are you doing this? Figure that out before you invest a dime.

There are many reasons to have set goals, but the big one is that it helps you stay on track with your savings.  Without goals, you will not know the timelines for you to do what, and to achieve what and, more importantly, how much risk you can take on; these are vital questions when it comes to investing.

All of this thinking should start with your personal goals. Start by listing your goals, and then figure out which ones are most important to you. Goals such as; a home, a car, an education, a comfortable retirement, your children, medical, caring for others etc., are a good start. After this stage, decide how long you want to save to reach each goal. This stage is critical because you will need to find an investment option that fits your time frame for meeting each goal. You can also speak to a financial advisor to help you with your goal setting.

Understand what you are investing in 

Another critical thing to look out for before investing is knowing what different investment options are available to you and their characteristics. Do you have a fair understanding of investing? Do you know the various options available, and can you extract the difference and similarities between investment products?  

If this is something you’re unsure about, you could ask a financial advisor to help you out or pick up an investing book and give it a full readthrough before making any investment move. The content should connect real-life concerns and goals to investment options and explain how different investment options work. Even if you plan to or have a financial advisor to help you out, you should understand what and where your money is going.  

Have a plan for uncertainty

Before you consider investing, make sure you have a plan to protect you in times of uncertainty. Like it or not, sometimes emergencies do interrupt investment plans. You might have an effective investment plan, but what happens if you lose your job? What if you get sick? What if your car breaks down? The point is to make sure you have set yourself up for success in your investing journey by cushioning yourself against unforeseen events.

Experts have recommended that people thinking of investing should have an emergency fund stowed away in a savings account somewhere. It’s there solely to ensure that life’s emergencies don’t upset your bigger investment plans. You should talk or sign-up for financial advisory services if it is a daunting task.

 

Is the investment company licensed?

You have done well planning for uncertainty, and now you have an investing goal all setup. Now, to whom do you want to give your money? There are several investment companies in Ghana, but how do you make the right pick?  Research reveals that con artists are experts at the art of persuasion, often using various tactics designed to lure unsuspecting victims. It is prudent for investors to conduct a thorough background check of anyone promoting an investment opportunity before investing with them. These are signposts to help you;

Research the investment company:  Find out who are the people behind the investment product.  What is their experience when it comes to managing people’s money? 

Check their Website:  A scope on their website is another indicator of their genuineness. On the company’s website, determine whether they have partners and whether regulators like the Security and Exchange Commission (the “SEC”) recognise them. 

In line with Regulators: Regarding the SEC, you could look into whether those managing the investment have had brushes with the law. If you are unsure who to talk to regarding background checking, call the SEC’s toll-free investor assistance line at 0 800 100 065 or send them an email.

Do a risk to reward analysis

Every investment product has the potential for great rewards and, vice versa, significant risks. Understanding this crucial trade-off between risk and reward can help you separate legitimate opportunities from unlawful schemes.

Investments that can offer very high returns may expose you to substantial investment losses as well. Do note that every investment carries some degree of risk, and no legitimate investment offers the best of both worlds.

Many investment fraudsters pitch unsuspecting victims high investment return opportunities with little or no risk. Ignore these so-called opportunities. 

In conclusion, there is no doubt about the importance of investing as one of the routes to financial freedom. It is therefore essential to do due diligence or, in other words, prepare yourself adequately before venturing. Investing is not a sprint but rather a marathon. Consider these five things before you invest.  Get started on the right foot, and you’ll never stumble.

Your turn

Are there other things that you think should be on our list? Which of these five things will you consider first before you invest? Have you tried investing in the financial market or tried the Achieve App? What has your experience been? Share your thoughts with over eight (8) thousand readers in the comment session.