18 Things to Consider Before Making a Major Investment

Making a major investment is a big step toward building wealth and achieving long-term financial goals. But it can also be risky if done without careful thought. Whether you’re investing in real estate, stocks, a business, or even education, understanding the full picture before committing your money can mean the difference between success and regret. Here are 18 essential things to consider before making a major investment.

1. Understand Your Investment Goals

Are you investing for long-term growth, short-term returns, retirement, or passive income? Knowing your “why” helps determine the best vehicle for your money.

Real-Life Example: Carlos wanted early retirement. His financial advisor helped him prioritize index funds and real estate for long-term wealth-building.

2. Know Your Risk Tolerance

Your personal comfort level with risk should guide your choices. Some investments are volatile but offer high returns, while others are safer but slower to grow.

Real-Life Example: After losing money in crypto, Jenna realized she preferred more stable investments and switched to dividend stocks and REITs.

3. Research the Investment Thoroughly

Understand the asset or business inside and out. Look into past performance, future projections, market conditions, and red flags.

Real-Life Example: Mark read 10 books and followed industry blogs for a year before investing in his first rental property—it paid off big.

4. Consider the Time Horizon

How long can you leave your money tied up? Some investments require patience, while others offer quicker returns.

Real-Life Example: Lila invested in a five-year CD knowing she wouldn’t need the funds until her child started college.

5. Evaluate Liquidity

Can you access your money if needed? Real estate and certain retirement accounts can lock up funds.

Real-Life Example: Tom bought a vacation rental but later needed funds for an emergency. Selling took months—he now keeps cash in liquid investments too.

6. Assess the Upfront and Ongoing Costs

Factor in hidden fees, taxes, maintenance, commissions, and transaction costs. A good deal on paper can be costly in reality.

Real-Life Example: Michelle bought a fixer-upper rental but underestimated renovation costs. Her return was delayed two years.

7. Diversify Your Portfolio

Don’t put all your eggs in one basket. Diversifying protects you from total loss and smooths volatility.

Real-Life Example: Ken lost a chunk of his net worth when a startup failed. Now, he spreads his investments across stocks, bonds, and real estate.

8. Know the Tax Implications

Investments can create taxable events. Understand capital gains, tax shelters, and write-offs.

Real-Life Example: Sarah invested in mutual funds and was shocked at the tax bill. She now uses tax-efficient ETFs and a Roth IRA.

9. Understand the Legal and Regulatory Environment

Investments like real estate, franchises, and securities may be subject to complex rules. Always understand the legal landscape.

Real-Life Example: When buying a duplex, Allen learned about zoning laws the hard way. He now consults a lawyer for any big investment.

10. Review Your Emergency Fund

Never invest money you might need in a crisis. Keep 3–6 months of expenses accessible.

Real-Life Example: Nina invested her entire bonus, only to face a layoff three months later. Now she always protects her cash cushion first.

11. Clarify the Exit Strategy

How and when will you get your money back? Will you sell, cash out, or collect income? Always plan your exit.

Real-Life Example: Matt bought a small business but didn’t plan for a sale. When he wanted out, he had trouble finding a buyer and took a loss.

12. Check for Alignment With Your Values

Is the investment ethical and aligned with your beliefs? Investing in line with your values can bring peace of mind.

Real-Life Example: Amanda divested from companies that didn’t align with her environmental values and shifted to ESG funds.

13. Know Who You’re Partnering With

If your investment involves other people, know their track record and reputation.

Real-Life Example: Bryce invested in a friend’s business without vetting them. The partnership fell apart, and so did the money.

14. Watch for Emotional Decision-Making

Fear of missing out, peer pressure, or panic can cloud judgment. Stick to your plan, not your emotions.

Real-Life Example: Terri bought stock at a peak due to FOMO and lost 40%. She now follows a strategy, not social media hype.

15. Consider the Opportunity Cost

What will you give up by choosing this investment over another? Weigh all options.

Real-Life Example: Jon considered investing in a friend’s startup but instead put the money in a rental property—and tripled his income over 5 years.

16. Ensure You Understand the Investment Product

If you can’t explain it simply, don’t invest in it. Complexity often hides risk.

Real-Life Example: Lydia passed on a complex annuity her banker pitched. Later, she learned it had massive hidden fees.

17. Use Professional Advice if Needed

Financial advisors, CPAs, and attorneys can offer clarity, strategy, and protection. Use them when the stakes are high.

Real-Life Example: Eli hired a CPA before purchasing a business. The financials revealed red flags that saved him from a bad deal.

18. Ask: Will This Investment Help Me Sleep at Night?

No return is worth losing peace of mind. If the risk keeps you up at night, it may not be the right move.

Real-Life Example: Tori pulled out of a risky hedge fund and switched to index funds. She slept better and still earned steady returns.

20 Inspirational Quotes About Smart Investing and Due Diligence

“An investment in knowledge pays the best interest.” — Benjamin Franklin
“Risk comes from not knowing what you’re doing.” — Warren Buffett
“Price is what you pay. Value is what you get.” — Warren Buffett
“The best investment you can make is in yourself.” — Warren Buffett
“Don’t look for the needle in the haystack. Just buy the haystack!” — John Bogle
“Know what you own, and know why you own it.” — Peter Lynch
“Time in the market beats timing the market.” — Unknown
“Never invest in a business you cannot understand.” — Warren Buffett
“Wide diversification is only required when investors do not understand what they are doing.” — Warren Buffett
“The four most dangerous words in investing are: ‘This time it’s different.'” — Sir John Templeton
“I made my money by selling too soon.” — Bernard Baruch
“Every once in a while, the market does something so stupid it takes your breath away.” — Jim Cramer
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” — Warren Buffett
“Wall Street makes its money on activity. You make your money on inactivity.” — Warren Buffett
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Philip Fisher
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” — Paul Samuelson
“Buy not on optimism, but on arithmetic.” — Benjamin Graham
“If you’re not willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” — Warren Buffett
“The investor’s chief problem—and even his worst enemy—is likely to be himself.” — Benjamin Graham

Picture This

Imagine standing at the edge of a major investment decision, not with anxiety, but with confidence. You’ve done your homework, spoken to the right people, and made a smart, informed decision. You watch your money grow steadily, not from luck, but from wisdom. You sleep well knowing your future is built on sound decisions.

What would your financial future look like if you paused and planned before every big investment?

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Disclaimer

This article is for informational purposes only and based on personal experience and general investment principles. Always consult with a financial advisor, CPA, or attorney before making major investment decisions.