9: Choosing Investments

When deciding on an investment, there are some important questions you should ask. We’re going to go over four key questions in this video.

First, is the investment a match for you?

An investment that’s a match for you is one that’s appropriate to your risk tolerance and investment goals. Risk relates to the possibility that you could lose some or all of the money you invest.

Second, how will the investment make money?

Investments make money in different ways, such as the interest earned from bonds, the dividends received from stocks, or the increase in share price.

Whatever investment type you consider, find out what the investment does and how it will make money.

Third, how liquid is the investment?

Liquidity refers to how quickly you can turn your investment into cash.

A liquid investment can be sold rapidly at its asking price anytime within market hours. If your asset is illiquid, you may have to hold on to it even as it loses value.

And finally, how much will the investment cost you?

Before agreeing to buy or sell an investment product, make sure you understand how all the fees and other charges will work.