Questions every Investor knows to ask first

Tuesday, January 15, 2013
By Faisal Laljee

In order to find investment success you need to be prepared to work. Jumping in blind and putting your money into the first opportunities that come your way very rarely works out. If you want to get a good return on the money you put in, you need to be careful. You need to learn how investing actually works (these books by Ken Fisher are a great place to start). You need to ask smart questions. You need to ask questions like these.

1. When working with a financial advisor or investment broker, ask how that person is going to be paid. Some brokers and advisors are paid by the companies and funds they are promoting and in which they want you to invest. Sometimes they take a commission out of what you earn. Sometimes you pay them directly. Sometimes it is an amalgamation of all of these things and it changes over time. You don’t want to invest in something, believing that the advisor is being paid via the company and then get stuck with a bill in a few months. Don’t just ask about this year. Ask about next year, and the years after that—just to keep your bases covered.

2. How do you feel personally about the investment? A lot of investment professionals will tell you to take your personal feelings out of the equation but, according to this article by Chuck Jaffe, your personal feelings about the investment are just as important as your business reasons for doing so. You don’t want to invest in something you find morally reprehensible or else part of you is going to root for that investment to fail, which is not a healthy way to go into an investment, no matter how much it promises to pay out later.

3. What is the investment’s SEC status? Investments need to be either registered with the SEC or be deemed registration exempt. The company needs to have proof of this registration or exemption. Ask to see certified proof of their status and then use the EDGAR database to double check what they have sent to you. If you can’t find proof of their registration or exemption, do not invest in the product, company or fund.

While there are general investment questionsthat you should always ask, if you really want to make sure your money is safe, you’ll need to make sure you ask product/type specific questions too. There are different sets of questions that you need to ask with each investment you are thinking of making. Make sure you ask the specific questions as well as the general questions if you want to truly protect yourself.

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