Hello! At Joyful Dividends, I discuss investing your money so as to make consistent extra income safely. In order start investing successfully, it goes without saying that you should never lose money. If you want to achieve your financial goals with no hiccups or frustration, here are some good questions to always ask yourself.
Whether you have just started working, been working a few years, or you are a retiree, you may have thought of how to invest your money at some point. It is not an easy question to ask. There are so many investment options out there. You don’t feel confident about investing because you have no financial background. You are very busy with work, family, children, socializing, and you have no time to monitor your investments.
If the above describes your situation, you may be thinking of looking for a good financial planner or advisor.
Before you do that…
Always remember what Warren Buffett’s 1st rule is:
Rule No. 1: Never Lose Money.
I’ll like to provide you with some questions you should always ask before handing your money over to a financial advisor or banker. By asking yourselves basic questions from the start, you will be able to avoid trouble and losses in the future.
5 Reasons To Be Inquisitive About Investing
Here are 5 reasons why you should be exceptionally inquisitive when investing with a financial advisor:
- It’s your money at stake.
- Investing is an extremely wide field and no professional will always have the right answers. In short, it is impossible to ask a dumb question about how you are investing your money.
- Hence, don’t be afraid to look stupid. You are paying for advice.
- A good financial advisor who puts your well-being first will always be patient enough to answer your questions, no matter how basic they are. A bad one will not want you to ask too much.
- Investors have lost money before by listening to advisors who may be following regulations blindly.
As an investor myself, I understand the pain of losing your hard-earned money. Some investors have already lost. Take steps to avoid such scenarios before they happen!
Here are all the right questions to ask before making an investment:
Ask About That Investment Product
Here are questions to ask your financial advisor, before making an investment decision:
- Is this investment registered with the regulatory authorities?
- Can this investment help me to achieve my goals within the next 5 – 10 years? Some of these goals may be to save money to travel the world, for my children’s education or for my retirement plans.
- How will this investment make money? Is it through dividends, interest returns or capital appreciation?
- How much in fees (sometimes this may be hidden) are you charging me to buy, manage and sell this investment?
- Is the investment easy to liquidate? What if I need money tomorrow for an emergency? What is the maximum I will lose if this investment goes kaput!
Once you have satisfied yourself with the above questions, you now need to ask yourself if your financial advisor is worth his weight in gold.
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Ask About Your Financial Advisor
Before putting your hard-earned money with a financial advisor, consider asking him/her these as well:
- Are you properly authorized to sell this investment product and have you passed the necessary tests? What are they?
- How long have you been in this business? What kind of training and experience do you have?
- What is your investment philosophy? Would you invest in this product if it was your own hard earned money?
- Do you make more if I buy this investment (e.g. a stock), or the other (e.g. a bond)? If you didn’t make extra money from this recommendation, would you still ask me to buy? (check if he acts in your best interest)
- How do you get paid? Is it by a commission, amount of assets under management, or a flat fee? This will shed light on how strong your advisor’s incentive is to get you to buy a product.
Before you buy into an investment the next time or if someone tells you how good so and so an investment is, always keep this blog post in mind.
Remember Warren Buffett’s second rule:
Rule No. 2: Never forget Rule No. 1