Things to Consider Before Investing Money are listed and explained in this article. You will find this helpful and informative.
What to do before investing
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Investment is good and can make you very wealthy in just a matter of time if you know what to do. But just because it is good does not mean that it does not involve any risk.
As long as you want to be an investor, you would be presented with so many investment opportunities but before you accept one or the other, here are four things that you need to put into consideration;
1. The Returns on Investment (ROI)
Of course, this is mainly why you are investing. Make sure that the returns on investment are more than the inflation rate because as long as the economy is concerned, there is bound to be an increase in the prices of goods and services more than there may be a decrease.
This acts as a measure of the fluctuation in the process of goods and services over a particular time. The prices of goods and services directly impact living costs which in turn reduces the value of money so that if your returns on investment are less than the date of inflation, your investment would have lost economic value.
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2. Opportunity Cost
This is the value of the other alternative. For those people who have different portfolios where they invest, it is often best to calculate the Returns on investment and the option that has the least opportunity cost is what should get the investment and the other should be left to other people who may be interested.
3. Your Financial Position
Everyone is usually not in the same financial position, thus it is important that you take a close look at where you are financially before you venture into any kind of investment.
Those who are just starting out in investment should be on the lookout for both security and returns. You should realize that if anything should happen to your investment, you will have little money left in your account to lean upon.
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But if you are financially capable, you can then afford to take some of the major risks because should any woe befall their Investment they will still have enough cash either at hand or in the bank to fall back on.
4. Your Financial Goals
People go into investments for several reasons and when investing, the reason for doing so should be a factor of consideration too.
To some people, wealth is what they want while others just want to live a very comfortable life. Where you invest your money should be based on your investment goals.
wealth is what you want to gather, you should always look out for the investment opportunity with much Returns on Investment.
In conclusion, a wise man once said that we should “test the waters before dipping our two legs in it” you should not just stand up and grab every opportunity that is presented your way, you should learn to analyze the situations before putting in your hard-earned money into it.
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If you successfully consider these points that have been stated here, you will realize that you would be able to avoid making investment decisions that would crumble your finances instead of making you wealthy in the long run.