If you are in a position where you have some capital and want to invest it, it can be hard to decide what your best options are. There are so many investment opportunities that it can be somewhat bewildering, and wanting to be sure of where to put your money can be quite a burden. How do you make such important decisions, and how do you know if you’re doing the right thing? The best way to approach this problem is to talk to an independent financial advisor, someone who is an expert in getting you the best return on your investment. Before you meet with them, there are a couple of things they will ask you that you need to have considered so you can be clear about your position.
Weighing up risk
This is the main factor in determining which investments are right for you. In very simple terms, the higher the risk of an investment, the higher the rewards could be. Therefore, the lower the risk of an investment, the rewards will be correspondingly lower. The critical fact is that it’s impossible to be certain how an investment will work out. The nature of a high-risk investment is that your chances of losing money are greater than on a low-risk investment, so if you can’t afford to lose your money, it’s generally not worth going for higher risk in the hopes that it will pay off. Low-risk investments may not always yield such spectacular results, but the chances of losing your money are reduced. Your financial advisor will ask you to complete a questionnaire that will assess what level of risk you are comfortable with, and use your risk aversion score as a base for their recommendations.
Do you have an interest in where your money is placed?
There are several aspects to this question. Do you want to be able to monitor the activities of stocks and shares? Do you have concerns about the ethical credentials of the businesses you may be investing in? If you have any preferences for the types of investment you make, or if you have no interest in where the money goes as long as it’s bringing in some revenue, these are things that will help your financial advisor to select the best options for you.
Being aware of the implications of investments
There are certain restrictions, tax implications and other factors you need to be aware of before making investments. For example, if you invest in real estate, you will be subject to capital gains tax when you sell unless you purchase a like for like property under the 1031 exchange properties regulations. Making sure that you understand all the laws and taxes that can come into play with different forms of investment is essential to making the best use of your money.
It can be an exciting prospect, having the cash to invest and watching the growth rates of your investment. For your own peace of mind, consider your decisions carefully and don’t risk anything that you couldn’t afford to lose.