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Questions to Ask When Investing

03 NOVEMBER 2020

By James Patrick Q. Bonus

I often get asked by friends and acquaintances about investing: ’Where should I invest?’, ’How much should I put in?’, ’What’s the perfect timing to enter the financial market?’, and so on. You may have the same queries or concerns when it comes to financial decisions, particularly on investments.

In response, I always ask them to answer the following four questions to serve as a guide in addressing their most pressing financial investment concerns.

What is your overall objective?

Is it to build up emergency funds? Money to spend for travel? In preparation for your child’s education? Or just to earn income on excess funds? Whatever it is that motivates you to explore investing, it is critical to adequately and clearly establish your objectives and goals first in investing. Your objectives will guide you in answering the rest of the questions. Determining your objectives also helps you define the amount of money you’ll need to invest now or in the future, and will also provide you with the parameters for making future decisions relating to your investment, such as investment withdrawals or sales of invested assets.

What is your time horizon?

How long can you wait until you get your money back? If your objective is to fund a future activity or event, such as a wedding ceremony, then the timing of your investment’s maturity must be factored in. Long-term plans such as setting up a child’s college tuition fund will dictate not just the amount of funds or type of investment you’ll need to proceed, but also the timing and frequency of your investments to achieve your defined goal.

What is your risk appetite?

How much money are you willing to lose? If your objective is to preserve capital while earning income, then investing in assets that are volatile in nature may not be the best investment outlet for you. I remember back in 2011 when I was quite anxious because our money that was earmarked for our wedding was invested in an equity fund, which saw its value fluctuate wildly due to the market’s reaction to the credit rating downgrade of the US government after a failed vote on budget deficit reduction plan. That was such as stressful moment! Knowing how much money you’re willing and ready to lose will help you determine which investment fits your financial goals.

What’s your investment aptitude?

How familiar are you with the different types of investment outlets? Did you know that certain insurance products also have investment features that can address your needs? Who can help you further improve your financial quotient? It is incumbent upon us to improve our knowledge in order to make better decisions, whether it be investment-related or not. Being educated in all things financial might be cumbersome or daunting for some, but learning the basics, such as the time value of money and risk management, are critical before making any investment decision. We should not select investment options where we currently do not have a full understanding or appreciation of its attendant risks and features. Having the right information protects us from being taken advantage of by scammers and unscrupulous individuals.

No share of stock, bond or other investment medium is perfect as an investment to anyone. But determining your objectives, defining your time horizon, establishing your risk appetite and gauging your investment acumen will help find the most appropriate investment solution for you.

James Patrick "Japs" Q. Bonus is a Senior Vice President and the Chief Financial Officer of Etiqa Philippines.

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