For many people, the decision to whether they should invest more of their money into more investments to grow their money is a simple answer to this question – Is it giving me a return that is making me money? But the simplicity of this question also poses a very tough question to answer. The irony is that you need to know your answers in order to see whether you are ready for the next level of investments or just simply scale them up.
Regardless of the amount of money you already have parked in mutual funds, structured deposits or even insurance products, you want to make your money work as hard as possible for you so that you can have an easier life in the real world. This is why knowing the ins and outs of investing is a critical step for your long term financial plans. Not many people will be able to withstand a financial setback from their own investment mistakes.
So to determine whether you are ready to move up the investment savviness ladder, you need to comprehend the following questions and give yourself a truthful answer.
1) Do you really understand the way your current investments work?
2) Will your principle actually fluctuate if you have to divest your investment halfway through the term?
3) Are you aware that your income tax bracket should be a determinant in choosing your investments?
4) Are you diversifying your portfolio or making hedges to avoid total catastrophe?
5) Is your assets liquid enough for you to draw upon for your financial plans in the next 5 years?
6) Are your current returns keeping up or exceeding inflation rates?
7) If you are investing in stocks, do you really understand the businesses that those companies operate in?
The more questions above that you answer “No” indicates the more you are not ready to move up the investment ladder. These are not just theory. Because when you eventually move up to the next level, you will fully understand why those questions above are of utmost importance. And if you had made mistakes in the past, you will probably agree that you need to figure out those questions should you be able to turn back the time.
Every investment promoter will market their products as the best around in their category. And they have their own facts and figures to say so. This makes it a very big pool of financial products for you to choose from. If you don’t understand what you are looking at, you are in effect gambling and not really investing with calculated decisions. The worst part is that when you fail, you will take it as a lesson learned. But actually you can avoid it by just better educating yourself on where you are putting your money.