… is not necessarily the one with the highest return.
… nor is it the one with the lowest risk.
… neither is it just about investing in you.
So how can we say that we have the best investment? What are the criteria that make an investment worth considering? In my short stint as a financial adviser, I have been asked the “best investment” question numerous times and it is quite difficult to give a basic, general answer for all. The best investment would vary depending on the profile of the person asking. Having said that, I do have four questions I usually ask to determine if someone is on the right track:
1. What’s your investment for? It all starts with a dream or goal. If one is unsure what the investment is for, then it would be hard to say if it’s the best investment. For me, the first thing we figure out before investing is the goal.
Without that, it’s as good as going nowhere. Without the end in mind, we tend to save and invest for nothing, which eventually ends up with us spending it on something we don’t really need.
2. How much is your target for your investment? A goal more often than not has its financial equivalent. Without it, then it will be difficult to say if you have the best investment. For all you know you might be investing in an instrument that earns at a slower pace, thus, endangering you from achieving your goal.
3. When do you need the money? Time is of the essence when investing. Knowing when you need your investment prevents you from withdrawing before that time. If you need the money by the time your kid is in college, then the only time you withdraw is when your child is about to start college.
4. What investment instruments did you use? If all questions above were answered, the next thing you want to know is if you got the right investment instrument for your goal. The investment vehicle you use should match the time frame you have before you actually need to reach your goal. A goal for which you still have 10 years to prepare will have a mismatch if the investment instrument is time deposit, while a goal that needs to be achieved in one year may be at risk if the selected investment is a mutual fund, where risks are higher in the short term.
With all these questions answered, what now is the best investment? The best investment is being able to know the direction in which you are headed. It is the one that addresses your needs. There is no one-size-fits-all investment. It is the one that leads you to achieve a bigger goal.
Jeremy Jessley Tan, RFP® is Registered Financial Planner of RFP Philippines. To learn more about personal financial planning, attend the 60th RFP program this March 2017. To inquire, e-mail firstname.lastname@example.org or text <name><e-mail><RFP> at 0917-9689774.