Step 5 to investing is choosing your investments. Once you know your asset mix, you can choose specific investments. Before you choose an investment, understand how it works and the risks involved.
- How does the investment work? Do you understand the investment well enough to explain it to someone else?
- What are your goals? Are you looking for safety, income or growth from this investment? Or both growth and income?
- What are the risks of this investment? Are you comfortable taking these risks?
- How much do you expect to earn on this investment? Is this realistic?
- How long do you plan to invest? Is this a short-, medium- or long-term investment?
- What are the costs to buy, hold and sell the investment? And will you pay taxes on the money you earn?
- What other investments do you have already? How does this investment fit with your other investments? How will it change your asset mix?
Learn more about the dangers of investing in something you don’t understand with this video.
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