Financial Health Checkup: A must before investing.

Though in many of my previous posts I have stressed on investing in debt and low risk instruments of investment taking care of the present financial scenario, yet there are many traditional investors who think that investment in the securities market is the best option knowing that high risk is involved in it. It is a fact that high return investment options are always associated with high risk. But in this case also we have to take care of many points before investing in such options.It is not always possible to meet all financial goals with available savings. If the savings are limited and the needs are substantial, then one must invest the savings in avenues that would offer high returns. But high returns mean high risk. So what to do??Infact there are various scientific methods by which you can understand your risk profile before investing. Its also known as financial planning or financial health-checkup.

So do your financial planning without anyone’s help and get an idea about your risk taking ability and where to invest before investing.
Your age? (Age is an important factor in deciding what amount of risk to take)
• 25 to 35
• 35 to 50
• 50 to 65
• Above 65

Your position is best described by:
• You are self-dependent and don’t support anybody
• You have dependent(s)
• Nearing retirement
• Retired
How much of the following needs have been taken care of? (Fully, partially, not at all)
• Children’s education
• Insurance
• Retirement
• Housing
What proportion of your current expenses is funded from your investments?
• Nothing
• Upto 15 %
• 15 to 30 %
• 30 to 50%
• More than 50%

Your earnings in the future will:
• Far exceed inflation
• Marginally ahead of inflation
• Keep pace with inflation
• Will not keep pace.

If the price of the shares you are holding falls, then you will:
• Sell all of them
• Sell some of them
• Keep them as it is
• Buy more of them

If you answer these questions and find answers on your own then you will be able to get an idea about your financial standings and what step to be taken. I think everyone must do this financial check up to avoid heavy loses and to go for the right investment path.