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5 Things to Consider When Choosing a Financial Investment

Apr 23 2012

The Mutual Fund Store office, 37308 Six Mile R...

The Mutual Fund Store office, 37308 Six Mile Road, Livonia, Michigan (Photo credit: Wikipedia)

Investing your money into appropriate investment cycles requires financial sense in order to keep earning steep profits. Before you begin investing your money, there are certain aspects that you must look into. Investment not only requires money, but also wise financial management that can help you earn greater profits.

Many investors have lost all their savings just because they invested impulsively. On the other hand, investors with low finance have been able to make big money just because of their financial prudence. Before you start investing, ask yourself five questions mentioned below:

1. Are you financially sound at this time?

To make sound investments, one must be financially sound. It is not wise to invest money while you have outstanding debts or have no savings to pay in case of emergencies. After you have paid your debts and saved some amounts for the rainy day, you can use the remaining amount to make investments. Your savings should take account of at least four to six months expenses. Also, if your career is unstable and you are facing financial constraints, you should maintain at least 6 months of savings.

2. What do you intend to do with all the money?

You should assess how you wish to spend the investment money. If you wish to use it to pay for a down payment on your house or for college/university, then your choices of investment should be different than if you were to use the money for retirement purposes. If you wish to use that money in the next five years, then you should go for a money market account.

3. Are you aware of your many investment options?

If you are a beginner, you should know that you can make big money by investing money in a mutual fund instead of switching your investing options. Stock market investment options require thorough knowledge to make a lot of money. You need time to invest other than just money.

4. Do you need a financial planner in this market?

If you think you are not able to understand the money market volatility, then you must hire a financial planner. A financial planner has the knack to make wise stock market decisions and help you select the most profitable stock options keeping in view the predictability of stocks.

5. What are the varied options available to you?

As a beginner, you should consider benefitting from mutual funds, which have small initial investment. Many mutual funds allow establishing monthly automatic drafts in order to avoid greater initial investment. You must also take account of average annual return and operating costs over time.

You must always remember that these stock market investments have their highs and lows. It is in your best interest to move out of the investments during their bad phases.

Allan has been blogging about investing and personal finance. He has contributed numerous articles on savings accounts, shares and managed funds.

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