Thursday, 24 March 2011

Precautionary measures for an investor

Recently an investment firm become insolvent and the hard earned money of all investors have gone forever. This may be happened with irresponsible persons who lavishly handling their investors money. The trust of the firm and also the dreams of the investors are over. Here I wish to tell you some important things an investor should do before investing your money. There is an advice about marriage. Enquire all possible information and past histories of the would-be spouse before getting married and do not enquire any such past information after marriage. The first part of this statement is applicable in case of investment also. Collect all possible information about the method of investment before investing your money. But do not obey the second part, here you have to enquire more about your investment after made the investment and if you feel insecurity, get out of the investment as soon as possible.

Here are some important precautions you have to take before investing in any financial instruments.

Collect all information and documents before investment. If possible try to get all documents in writing. There may be leaflets and booklets about the investment. From internet also you can get valuable information about the financial instrument. You can collect some valuable information from nay reliable blog posts or from the website of the investment firm also.

There is no use to collect all these documents unless you read it thoroughly. So read all such information carefully and understand the nature and methods of investment. Learn how they utilize your money to get a good return from your investment etc.

You should verify that the investment is reliable or not. You should also verify that whether the investment obey all current rules and regulations. Is it a quick rich program or not. There is no such reliable quick rich program. Such programs make rich only the investment firms or companies, not the investor. So verify the authenticity of the investment. It should abide the law of the land.

Seek how much the scheme charge from you. Is it taken any commission or service charge from you? What is the net return from your investment? What is the tax impact of the investment? What would be the actual return from the investment? Is there any guaranteed return or not? How they attain this return? All these questions must be answered satisfactorily.

You have to understand the risk of such investment. Some high return investment may give you high loss also. So learn well about the risk factor of the investment and verify that the risk of such investment is bearable as per your financial goals. For example, if you are a retired employee, you could not invest your gratuity money in high risk investments, because that may be your only income after retirement. Then you should invest in safe investments, even if it gives you only a low return.

You have to check that how much liquidity is there in your investment scheme. How easily you can shift your investment to liquid cash when there is any emergency. Some safe investments must not allow enough liquidity. So check the liquidity when compared with your financial goals.

Find whether the investment is suitable for your investment goals. If you invest for the higher education of your child, the investment must be matured when the child need money for higher education, unless there is no use, just like the above mentioned retirement plan. So the investment must be suitable for your financial goals. If you need money in a short while, you should not go for long term investments.

Compare your investment plan with other available investment plans and check whether the other plan is more suitable for you. If so do all the above steps with the other plan also? But do not be cheated with misconceptions. And also check whether this investment plan is compatible with other investment you have already done.

When all the above factors are favorable, try to invest through any reliable intermediaries, because it is convenient for you to collect necessary information and redeem your investment whenever necessary. The intermediaries will give you all after sale service and support. At the same time you can get all necessary clarifications from them.

Find out what options are there if the investment strategy is not suitable for you, and how can you get out of the investment, if there is any miss happenings with your investment. If you satisfied with all the above points, you can invest in that scheme and can enjoy the fruit of a good investment.

Remember that you should be early, regular and stay in long time for any investments. Start at an early age and invest regularly and also invest for a long time. But do not forget your financial goals and responsibilities. We wish all success in your investment future.

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