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Five questions to ask before signing a document

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Last Updated: Jan 21, 2020, 04.10 PM IST
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Signing a document - Ask these questions before doing it

Most of us think that asking questions portray lack of knowledge and ignorance, but what it actually shows in curiousness and the eagerness to learn. How many times have we stopped ourselves from asking a question on investments? How many times have we just signed an investment document because we are told to? How many times have we signed without knowing what the document is exactly about?

So before you make any investment or sign on any financial document, make sure you ask yourself these questions:

1. What is the goal I am investing for?

Amidst the various goals you need to plan for, you must decide which investment avenue is ideal for a particular goal. Each goal that you wish to fund must be planned for with the investment that mirrors it in the most ideal way. For example, if your goal is short term, you could invest in fixed income funds and if your goal is long term, equity funds.

2. What are the benefits of my investment?

Knowing why you’re investing isn’t enough. Once the goal is identified, you need to pick a fund that matches it. The catch here is that there might be several investment options that could come close to matching the goal but they might still differ on several grounds. The key to picking one of the several options – ask.

Does the investment tenure match your requirement? Can you liquidate the investment as needed? What are options through which you could invest? Does it match your risk capacity? You must find the one that most closely mirrors your investment objective and choose that.

3. Should I combine multiple goals in one investment?

While some of your goals might be similar in nature, one investment instrument must not be entrusted with multiple goals. An investment, in isolation would require time to yield the desired result, in case it is a long term investment. In case you wish to withdraw part of that investment, to fund another goal half way through, it could hamper the overall return potential of the instrument. Hence, it is ideal to have dedicated investments to plan for individual goals to ensure maximum effectiveness.

4. What could the possible downside to my investments be?

A very important point in investing is to take due notice of the possible downsides of a particular financial instrument. For example, while investing in the stock market is often looked at a way of making big and quick money, it carries a huge risk due to the volatile nature of the market. Alternatively, one could consider investing in the stock market through mutual funds which are regulated, handled by professionals, have funds that cater to different investors’ risk profiles and provide diversification of risk.

5. What must I do after making the investment?

While making the investment is the first step, tracking it is the next. And tracking investments again can be done with some basic questions - On periodic intervals, ask if your objective is being met? Is the value of your investment deteriorating?

These are questions that will show you where your investment stands, so that tomorrow when you choose to fund your dream, your investment return will help you. It is important that you review and re-assess your investments at periodic intervals and if necessary, take steps to correct them.

These 5 questions will help to keep you on track with your finances and help make sure neither you, nor your investment goes astray.

An Investor Education & Awareness Initiative


Disclaimer – This document is for general information only and does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. This document provides general information on performance; financial planning and/or comparisons made are only for illustration purposes. The data/information used/disclosed in this document is only for information purposes and not guaranteeing / indicating any returns. Investments in MFs and secondary markets inherently involve risks and recipient should consult their legal, tax and financial advisors before investing. Recipient should also understand that any reference to the indices/ sectors/ securities/ schemes etc. in the document is only for illustration purpose and should not be considered as recommendation(s) from the author or L&T Investment Management Limited, the asset management company of L&T Mutual Fund or any of its associates. Recipient of this information should understand that statements made herein regarding future prospects may not be realized or achieved. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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Disclaimer: Content Produced by L&T Mutual Fund

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