Questions: Can You Describe Your Investment?
1. Can You Describe This Investment?
Your financial advisor or the person pushing you towards an investment should be able to describe the investment very clearly in just a few sentences. You should understand what the investment buys and sells, how frequently it trades or invests, and how much the investment expects to make.
You should be able to understand the basics of a possible investment in just a few minutes. If you don 't understand it, that 's a red flag that perhaps the person recommending it doesn 't "get it," or that it 's a dog.
Here 's an example with a sample …show more content…
The biggest losses over the last 5 years have been under 15% in our system, while the stock market overall has lost over 50% at least one time, and over 20% several times. That would be a really good level of risk and the product would be a worthwhile investment. Many of the products sold online don 't even mention risk. This should be an automatic red flag that the person selling the product doesn 't quite care as much about your money as you do.
Keep in mind that past performance does not guarantee future results for any investment.
3. What Are the Returns and Costs of the Investment?
Returns! Everybody wants to know how much money they are going to make when they make an investment. It 's the first thing most people look at when they think about investing in a product or fund.
This is a very dangerous way to invest. The returns of every investment should be judged against the risks and the costs of the investment. High returns usually mean high risk, and high fees too.
High returns usually mean high risk, and high fees too.High fees are the biggest reason for low returns. Many investment programs can make money, but overcoming fees is difficult. Choose investment programs with lower fees, and you 'll usually make more