When you start investing you should make sure have good knowledge of investing else do a deep research before entering in investments world. If you have good knowledge of investments before starting than you can achieve your financial goals by investing wisely. Below are the few questions you should ask before you start investing.
Q 1. Do You have Funds for Emergency?
If you have funds for emergency, so look at that emergency funds how long it could last for you. Keeping emergency fund is very important because you never know what unnecessary event can happen in life. Unwanted expenses which arise by an event can ruin your financial life. When you start investing one thing you should know, there are fees associated with investments. So avoid any early withdrawal unless you are not in need of invested money.
Q 2. Check your Investment Capacity?
Do a deep analysis of your source of income so that you will come to know how much money you can easily afford to invest in funds? Also it is wise to choose a reasonable income to start investing.
Q 3. Check how Much Money you are Able to Lose?
This question really important if you are staring your investment journey because investing have so many market risk. Sometimes you are in gain and at some point you may lose money, so consider this before investing. For example you are able to lose ₹1 lakh don’t go for investing 2 lakhs.
Q 4. Check what is better for you Investing or Paying Debt?
Suppose, if you have debt to pay off make sure invest as much as money which will not affect you debt pay amount. For example if you own a credit card and the bill amount you have to pay on a monthly basis then it does not make sense to put your credit card money into investments. Sometimes the interest rate for credit card debt is far higher than you could achieve from your investments. But make sure if you are getting the higher returns from your investment than it is worth investing and you have enough money to pay your debt.
Q 5. Be Careful of Low Cost Trading
Sometimes it feels good to have access to cheaper trades, but if you have used it wrongly it may ruin your profit. Many investors obliterate to consider the commission amount while making the mind what they should buy or sale. This is the time when you are in loss if investment market will down after you have bought the funds. It may cost a bit more if you add the commission amount to the loss.
Q 6. What is your Purpose of Investments?
If you keep a goal in mind before investing there are more chance you will achieve your investments goals. And keeping a goal let you track your investment is on right way. Some of the example of investment are savings for retirement, save money for education or getting higher returns than just keeping your money in cash.
Q 7. Are you Prepared for Investment Time and Risks?
When you start investing it means you are entering in system where you need dedication and time to grow your money. It does not means your money just grow in a short period it requires long time to grow.
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Q 8. Before Accepting Random Advice think Twice?
At some points you will get a lot of free advice. Once you are investing than before accepting any free advice think twice and take decision by your knowledge not by the free advice.
Q 9. How Much Risk you are Able to Handle?
It is very important for any investor they know what kind of risk can be handled easily and how much risk they can take in consideration. How much risk one can tolerate in order to achieve their investments goals. There is the rule as high the risk toleration capacity potential of gaining benefits also higher. When you take little risk there are chance to get less returns but when you take more risk than you can lose more money than you can afford to tolerate the risk.
Q 10. Know Well about Yourself
In fact, you know what you can do but in order to achieve your investments goals you should know your ability to plan and execution of the plan. Even check you interest in investing. Make sure you trust yourself that you can handle any bad situation which may come during the investments.