Investment Opportunities - The Basics.
The market for personal investment has grown extremely rapidly in recent years, and it is now common for the average American to be presented with investment opportunities on a regular basis. Whether you are considering unsolicited investment opportunities through sales calls, or simply researching your own investments, here are some things to keep in mind:
Understanding Your Account Agreement – When making an investment, you’re going to have to deal with a broker, whether your investment is conducted through an online company or a brick and mortar shop. Starting a relationship with a new broker will require signing a New Account Agreement, and it is absolutely critical that you carefully review this document. Make sure you understand who has decision making power on your account, as in many cases the sales representative may be able to make purchases based on what he or she thinks is best for you. Also look for whether you are paying for your investments up front or have a “Margin Account,” where you borrow money from the brokerage firm. Finally, make sure you understand how much risk you are assuming from the broker: words like “aggressive growth” can also be read as “risky investment.”
Understanding The Product You Are Investing In – You should never invest in a product or service you don’t fully understand. Be careful to avoid getting sucked into the hype surrounding a “hot investment” without doing your research. You can’t make intelligent investment decisions if you don’t know what exactly it is you own stock in.
Ask Questions – The sales representative who is trying to sell you on an investment opportunity should be able to provide you with any relevant information about the investment: this includes a recent annual report, the details of the offering, etc. . . Never give in to pressure to “invest now or you’ll miss out on a once in a lifetime opportunity” – type sales talk.
Think Of What They Need – When looking for investment opportunities on your own, remember that some of the most profitable investments are those in materials for hot commodities. Many a fortune has been made by someone who looks at an exploding industry (Computers, Cell Phones, etc. . . ) and instead of thinking “I should invest in that” thinks: “What do they need?” and invests in that. A certain creativity is essential to smart investing, so don’t be afraid to try and think of the whole picture when considering a product or industry.
By keeping these tips in mind you’ll find yourself making more intelligent investments. Just remember, especially if receiving an unsolicited investment opportunity, that if something sounds too good to be true it probably is. Beware of any sales talk touting “inside information” or that you “must act now.” Use common sense: Understand your agreement, the product, and ask lots of questions. Every investment carries risk, of course, but by keeping these thing in mind you’ll avoid the most obvious pratfalls that beset many investors.