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2 Major Questions to Answer before Investing Your Money

Written by Posted On Tuesday, 09 August 2016 17:34

Every individual has his or her own specific needs to save money for a short- or long-term goal. The other option comes in investing which allows you to grow money faster as compared to putting it in a savings account. A number of options are available in the market as where, when, why, and how to invest your money. However, there are some questions you need to answer before investing regardless of the industry like real estate, stocks, mutual funds, etc. you want to enter in.

1.What is the best use of my money?

The most important thing to consider is determining what use you have to put your money to. For example, if you engulfed in a large amount of debt, then consider if paying off is more important and a first priority. In the case your credit card debt is costing you around 25% per year, then it would wise to pay off this debt rather than investing stocks or bonds where normally you expect to earn around 10% or even less.
Carefully finding out the money use can also save you from uncertain future financial hardships that can wipe away all your investments. One option to protect yourself is by buying an insurance prior investing.

2. What is my objective or why do I want to invest?

Another important consideration comes by answering the objective for your investment. Obviously, the core-most objective most often in any investment is to earn a nice income, but what we plan to do or what are our goals is a different thing.

For example, we may opt for high-risk investments to earn money fast and thick without needing to worry for significant losses as we have enough time and backup to re-stabilize. On the other hand, your goal may be to invest money safe and sound without taking any potential risks due to the reason you would be needing money soon. Three major goals are normally associated with any kind or mix of investments.

•    A low-risk investment that keeps the investor’s capital safe. For example, investing in safe instruments like bonds to accumulate retirement funds.

•    A moderate risk investment than can provide acceptable returns. For example, buying a portion of stock in high-yielding companies that pays out dividends or future shares.

•    A high-risk investment that walks along with similar risks but can be availed for high gains.

Depending on your capital, it is also possible to cater two different investment goals at a time. For instance, an investment for a house down payment is a short-term, while planning to earn some money for your retirement is a long-term goal.

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