Asking The Right Investment Questions

There are never any certainties in anything, and investment is no different. There is no way that you can be totally sure that an investment is totally sound – though obviously there are some investments that are far safer than others.

One question you should ask about any investment is – How well have you covered yourself? Too many people look naively into the future and dream: “what if I am right” – and forget to ask the commensurate question: “what if I’m horribly wrong.” That’s not being negative about things; it’s being realistic. You should always ask questions to find out if you know what the risks are, and whether it’s a realistic proposal.

Sometimes an investment that sounds logical may not be good, just as taking a risk on something that might not look that profitable could pay off. So it’s best to cover yourself with more than one option, rather than hoping something will pay off and regretting it later. Balance things out – or in other words, make sure your investment has insurance of sorts. This is where an investment adviser is always a good option, as they will help you cover your bases and talk you through the risks of each type of investment.

Diversify

Investment advisers will often give advice to make sure your portfolio isn’t focused on one investment type. Always beware of people who tell you that you should put all your financial eggs in one basket.

In general, houses are a good investment in New Zealand. However, Kiwis are occasionally over-enamoured with houses to the point that it is their only form of investment. In reality, it’s normally best to make sure you have some different investment options. Even within your portfolio of houses, it’s good if you can diversify; having every house situated in Auckland, for example, may not have the same gains as having a house in a few different cities.

Having a share portfolio actually works in a similar way. It’s best to diversify so your investment grows and you can balance your losses with your gains. It’s often said that buying a good house has a lot to do with finding a good location. Investment, on the other hand, is a lot about timing. Just because shares are performing badly doesn’t mean you should sell them all at the first opportunity. But it’s also possible to hold on too long. This is where a good investment adviser is worth their weight in gold. They will help you with a long game mentality and strategy. It will profit in the end.

Get the right advice

In general, it’s good practice to check any advice you’re getting; reading this, for example, is a good starting point, but you should always check things against your financial needs and situation. If you’re not sure about the advice you’re getting, check it elsewhere. There’s no point sticking with an investment adviser just to be loyal. Your main objective should be to get good advice so you can make sound financial decisions.

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