Not every investment can help you gain returns. Though some good investments that are worth considering exist, a bad investment can lead to significant financial losses. It is possible to avoid bad investments by following some simple rules.
Try to avoid investments that contain surrender charges. Those that carry surrender charges can limit flexibility, causing problems in the future. Some of the bad investments that have such charges include broker-sold annuities as well as “B” share mutual funds. Some investments can also lead to surrender charges in different situations. For instance, when a couple that has a joint investment divorce, they have to pay costly surrender charges to free themselves from the joint investment.
If you want to a new house, you may have to put down some funds until your old home is not on sale anymore. Investments that have surrender charges make it hard for one to access funds without paying a costly fee. You should be careful about investments with limited marketability. Some of the investments tend to tie you down, making it hard to get out of. These are referred to as illiquid assets.
Some of the illiquid assets include real estate partnerships, private equity investments, and private placements. Putting too much money in a non-liquid investment can make it hard for you to gain access to the funds. Though some of the investments may promise high returns, they put you at risk of losing all your money. You can avoid this by putting less than 15% of your funds in such investments.
Keep off from investments that require high upfront commissions. Any investment that charges high upfront commissions is not a good investment. When you pay an upfront commission, there is no incentive for the financial advisor to offer you education and ongoing service. This rule does not apply when you are investing in real estate. The realtor is not obliged to service your property. They have to help you identify the right property and negotiate on your behalf.
Stay away from confusing investment. The lack of understanding of what a specific type of investment is all about can lead to poor financial decisions. If the investment opportunity does not sound simple, feel free to ask questions. Work with Egis real estate professionals who can help you gain more understanding about investing in real estate. If you still have more questions or doubt regarding the investment, you are allowed to walk away.
Avoid putting all your funds in one type of investment. This can make you lose everything you have worked hard for. Ensure you diversify by investing in different things. When you spread the risk, you minimize the chances of losing everything as the market fluctuates. You can work with a single advisor to help you manage your range of investments. Diversifying your portfolio can also help you gain more returns if the market moves in your favor. The most successful investors follow these rules, and so should you.