Five Questions You Need to Answer Before You Make That Investment

Introduction:

Investment is an act of committing money or other capital to an endeavor with the expectation of obtaining additional income or profit.  It simply means putting your money to work for you. The common way of getting money is by earning a salary.  So, if you want to earn more money, all you have to do is to work longer hours and in some cases keep changing jobs.  But the challenge in this is that you are limited to twenty four hours a day (which is impossible to work all day). The more hours you work, the less time you have to enjoy the money which is the reason why you need more money in the first place.  In the light of this, for us to avoid the limitation of time, we have to come out of the ordinary in growing our income base.  This is why we have to let our money work for us instead of us working for our money.   By doing so, you can keep increasing your money without increasing your work time.

Getting your money to work for you apart from increasing your income, can also serve as an insurance against future challenges; consider a loss of your job, accident, economic down turn, and in some cases death.  The money keeps on yielding more income because you are not directly involved in the operations of the business.  There is no doubt that it  is a wise thing to get our money to work for us( investment) but not all investment ends up yielding or producing good returns . In some cases you can end up losing all the money invested into the transactions.  In other for you to get that joy and fulfillment that you expect, that is why we are considering this basic question you need to answer before writing that cheque.

1.      What do I want to do with this investment? (Purpose)

Every investor must have a goal that he wants the investment to fulfill.  Is it for a long term venture like paying your children university education or a short term venture of buying a car or going on holiday? The answer to this will determine which of this three factor will drive the investment.  These factors are:

a.     Safety

b.     More income

c.      Growth:

If you need money for an immediate project, you will be more concerned with the income than it’s growth tendency.  If is for a long term project, safety will take a higher priority over income.  If is a retirement plan, it is obvious that growth and safety will be the most important factor to consider.  So, don’t just go about looking for a good investment without first identifying the goal, for this will in turn determine how good the investment is on the long run.

2.      When do I need the money?

 It is good for an investment to have a known time frame.   A lot of people have lost so much money because they didn’t know when to cash out of the investment.  If you want to buy a car, or you are saving for your child’s education or family health plan, your options will be different.   It is necessary to note that investment decision should not be made based on the volume of profit it will bring along, it should just be a part of it.

3.      The risk factor.

Every investment has a risk factor. No matter how good or secured the investment looks, it is important you know and understand the risk factor in the particular investment that you are considering.  There might be the need to talk to a professional before getting into it.  All investments should be taking on an individual basis and should be analyzed.   As such, even if you have been involved in the same investment before and it was even managed by the same person or establishment, there is still need to carry out a proper risk analysis.

4.     How much do I have to invest?   

This is very important. There are a lots of good investment but if you can’t afford it, why waste your time looking at it. There is always need to determine your area of interest so you can effectively investigate and acquire knowledge concerning it.  It is important to note that there is no amount of money that cannot be invested. No matter how small the money is, there is always an investment out there for it.  You can start building your own investment portfolio today with that little savings that you have as long as it can increase in value.

5.     What investment options do I have?

There is need to always have options when it comes to making an investment decision, it helps you to properly analyze your options.  In doing so, it helps reveal the strength and the weakness of each.  This is usually when the risk factors are revealed. No matter how good an investment looks, take time to sleep over it, there might be something funny about it that may not be easily discovered.

In conclusion, it is good to spend your hard earned money and enjoy life, it is better to save part of it but it is best to invest for savings. 

Idowu Okungbowa is the Managing Consultant of ‘Fredericks International’, a Human Capital Development and Marketing Consulting Firm. He is a public speaker and he has a great interest in youth development and entertainment. Email: idowuokungbowa@yahoo.com.