A Few Key Questions to Ask Prior to Making an Investment

By Ehsan Bayat

Introduction

As individuals enter the investment world, they may quickly become overwhelmed by the amount of information available to them. Before making an investment, potential investors should ask themselves a few key questions to ensure that the investment is legitimate and wise and. They should also be sure they are willing to accept the risk.

First, those interested in an investment opportunity should ask whether the seller is licensed and the investment is registered. More than that, individuals should conduct their own research to verify this information rather than trust the word of someone trying to make a sale.

Investing

Several resources, such as the Financial Industry Regulatory Authority (FINRA), are available to aid in this research.

The other important question to ask is how the risks compare with the rewards. An investment with high risk and low potential of reward is not a wise investment. On the other hand, an investment with low risk and high reward may not be legitimate. In general, low risk means low yield and high yield involves high risk. Promises to the contrary should raise a few red flags.

Conclusion

Finally, individuals should ask themselves whether they truly understand the investment. Even the simplest of investment opportunities can prove extremely complex, and potential investors should avoid situations that they do not or cannot fully comprehend. Trusted financial professionals can often shed light on investments. If not, perhaps the deal is not worthwhile.