We all like the idea of investing our money, whether it’s for a specific goal, for retirement or for a rainy day but do we really know what questions to ask before we decide to invest.

It seems when it comes to investing there are 5 questions you should ask yourself.

• What is the duration of the investment?
• What is the access to the investment?
• What is the income from the investment?
• What are the different types of investment?
• What is the risk of the investment?

Question 1: Duration of investment

It is important that you know how long you want to invest for. Are you a short term investor – someone that wants to invest for 1 to 3 years – or are you more of a long term investor (10 years plus). Dependent on your answer will depend on whether you should look for a more stable investment product that offers a consistent return (short term) as opposed to someone who is happy to invest long term and accept the ups and downs of the stock exchange or the property market.

Question 2: Access to investment

Money can be invested for a short period of time or over a number of years depending on your goal. Before you invest it is important to think about how quickly you may need your money in the future. For example, if you think you may need to get access to your money quickly then a high-liquidity investment such as a savings account or a 3-month fixed term account could be the answer but if you are thinking long term then potentially you could look at a property, KiwiSaver or fixed-term accounts.

Question 3: Income from investment

Before you invest you need to decide what amount of income you expect from your investment. If you are after a regular income then it’s best to put your money into a bank or bond that pays a fixed amount of interest over a set period of time. But if you are looking for your money to grow as much as possible then you may want to consider higher risk investments such as shares or property as these are more volatile investments and tend to fluctuate in value over time.

Question 4: Different types of investment

There are many different ways you can invest your money and often it’s a good idea to have a look at some of your options and then discuss these with a qualified advisor so they can help you make an informed decision.

Bank Deposits – savings and fixed term bank deposits will give a small return but give quick access to your funds should you need it.
Bonds – similar to a bank account but a bond usually has a higher interest rate than a bank and the price of the bond can fluctuate up or down.

Property – a rental house or commercial property is usually a long term investment. Not only do you receive rent from the property but the property can also gain in value over time.

Shares – Shares can rise and fall in value and be a bit of a rollercoaster, so they’re better as a long-term investment so we can ride out the ups and downs in the market.

Managed Funds – You can invest in a managed fund where your money is pooled with other investors’ money and spread across different kinds of investments. A fund manager chooses the investments, and each investor owns a portion of the total fund. This is a good way to get into the share market if you are interested.

A business – buying a business as in investment is something that will hopefully give you a regular return and will also give you an asset when you come to sell. It is a long term investment and one that may require expertise in a particular field.

Question 5: Risk of investment

As with all things in life, investing money comes with a certain degree of risk. No financial institution or investment is entirely risk-free but it can vary significantly depending on where you invest.

Investments can lose value and you may not get all your money back at the end so make sure you are aware of the risks and the costs involved in investing. Similarly, investments can increase in value too and higher-risk investments such as shares can achieve a great return in the long run.

Getting help

Investing your hard earned money is not something that you want to do off the cuff so even though you have asked yourself these 5 questions it would still be wise to seek some additional advice before you commit. There is a broad range of people that can help you with this including financial advisers like ourselves, insurance companies, shareholders and banks. Make sure whoever you choose has the correct qualifications and then book an appointment.

If you would like to speak to an FDG adviser then please contact our office on 09 486 6528 or drop us an email info@fdgl.co.nz