5 Important Things To Check Before Making An Investment
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5 Important Things To Check Before Making An Investment

  • 2 min read

  • Highlights

  • Best returns by proper preparedness for every investment

  • Enriching portfolio by diversification

  • Factors impacting your investment gains




In the haste to make money out of your investments, it is natural to overlook factors such as balanced portfolios or the right mix of investment instruments. The lack of balance in your portfolio could make you swing back and forth between the extremes.
In order to avoid such issues, consider checking these 5 essential things, before you make an investment:

1. Know your financial standing

a. Closely examine your current financial standing by reviewing your assets, income and expenses. Then decide on how much cash is available to you for investing.
b. Doing this ensures that you invest an amount that is in harmony with your income and your overall financial standing.

2. Study the market and investment vehicle carefully:

a. After you know your investment corpus, do a thorough research of the market and the various means of investing available.
b. You can analyse the schemes in terms of the rate of return, tenor, tax benefits and safety.

3. Enrich your portfolio by diversifying:

a. Investing in different vehicles lets you form a healthy ratio of high-risk and low-risk investments. Having a well-balanced portfolio is necessary because when your risky investments don’t perform well, you can fall back on your earnings from low risk investments.
b. Keep in mind that low-risk investment options provide more income stability as they are not overly influenced by fluctuating market forces. So, ensure that you have at least one low-risk investment like a fixed deposit.

Additional Read:How To Manage Your Money More Effectively?

4. Avoid cluttering your portfolio:

a. Even though a diverse portfolio is good, cluttering it is not a good idea, as it makes it difficult to track and monitor. Too many investment options also make it tedious for you to file your income tax returns.
b. It also prevents analysis and decisive action such as liquidation or renewal. To avoid this, ensure that you take professional advice when expanding your portfolio.

Additional Read:How to choose the best FD plan in 2018

5. Be aware of factors that impact your gains:

a. There are numerous factors that affect your overall gains from any investment such as inflation, tenor, principal, taxation, and rate of return. Before investing, consider and analyse all these factors to ensure maximum gains.
b. For instance, inflation reduces the value of money over time. Hence, no matter how good an investment may seem, it is always important to view its worth after subtracting inflation from the estimated returns.
This checklist can help you invest in the best schemes and grow your wealth. When you choose low and high risk investments or short and long term options, always be calm and clear-headed about risk and return. Ensure that you have a separate corpus of funds in a contingency fund, which you can use when you need urgent cash.

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