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Why research is important before making an investment

Unless you like flying by the seat of your pants or can afford to lose all your cash, it is sensible to carry out some research before you make any long reaching investment decisions. The financial markets are notoriously fickle and what goes up usually comes crashing down at some point in the future.

If you are new to the world of investing, it is usually helpful to consult with an expert such as Fisher Investments in the UK, but in the event you fancy going it alone, research is important before you make any type of investment.

Can You Afford to Invest?

Before you do anything, take a good look at your finances to ascertain whether you can afford to invest. If you don’t have much in the way of savings and you can’t afford to lose anything, you might be better off placing your money in a traditional savings account instead.

What is Your Appetite for Risk?

Some investments are riskier than others. Everyone has a different appetite for risk, so consider what yours is before you invest. Once again, if you are concerned about losing your investment, do your research carefully and don’t choose any high-risk investment vehicles.

Your success or failure in the investment market will depend on the information you have to hand at the time. Information on stocks, shares, bonds and other investment vehicles changes on a minute by minute basis. Doing some research into the market that interests you will help you to identity which investment vehicles are right for your needs.

Keep up to date with what’s happening in the world economy, as this will have a huge effect on the financial markets. Read the financial press and learn to spot the patterns as the financial markets ebb and flow.

Choose Your Investment Vehicle

Once you have narrowed down the field according to your appetite for risk, short-list some funds or investment vehicles that appeal and watch them for a while to see how they perform. Look for consistency in their returns, as this will weed out any that perform well due to one-off events. What you are looking for are funds that perform consistently well over a long period of time, although you need to be aware of the fact that fund performance is often aligned to the fund manager, and if they leave, the fund’s performance might go into sharp decline.

Check the Cost of Investment

There are often costs associated with investment funds. Read the small print to find out what these are. Actively managed funds tend to charge fees for the management service. This is fine if you are getting good value for money, but if you are looking to keep your investment costs low, it pays to be alive to the various fees.

Research won’t guarantee a good return on your investments, but it will minimise the possibility of failure. Remember to regularly review your goals and portfolio, so your money works as hard as it possibly can.

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