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What to ask before buying an investment product

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05 Nov 2018 | 3 min. read

A checklist of important questions to ask yourself and your financial advisory (FA) representative before you buy an investment product.

Key takeaways

  • Set your investment goals before meeting your FA representative.
  • Know your investing personality before investing.
  • Never invest in something you don't understand.

What to ask before buying

Investment products, such as shares, bonds, structured deposits, unit trusts, and investment-linked insurance, carry risks. Knowing what you're buying is the best way to navigate the risks. Here are a few things you should ask before investing in them.

Print and use this list when you meet your FA representative.

10 questions to ask yourself

  1. Is the FA representative regulated by the Monetary Authority of Singapore (MAS)?
    Check the MAS Financial Institutions Directory.
  2. What are my investment goals?
    Am I looking to protect or grow my savings? How much do I need and when do I need this?
  3. How much can I afford to invest?
    Do I have enough after setting aside money for my daily needs and for emergencies?
  4. What is my appetite for risk?
    How much can I afford to lose without overly impacting my financial situation and my financial plans?

    Tip

    Understand yourself better with the Risk Tolerance Questionnaire.
  5. Does the recommended product meet my needs? Which benefits are guaranteed and which are not?
  6. What is the potential return? Is it realistic? What is the maximum I could lose?
    Be careful of verbal promises and guarantees of high returns. Insist on written confirmation of any guaranteed returns or benefits.
  7. Should I invest with my CPF savings? If so, how does the return offered by the product compare with interest rates earned in my CPF accounts?

    Tip

    Money in your CPF Ordinary Account and Special Account currently earn a minimum interest of 2.5% and 4% per annum, respectively. This is both guaranteed and risk-free.
  8. When does the investment pay out?
    Can I afford to stay invested for that duration? Do I need the money earlier?
  9. Have I read all the documents?
    Do I understand the prospectus, product summary or product highlight sheet, contracts, warnings, exclusions and disclaimers, and terms and conditions?
  10. Are there other products that offer similar benefits and risks? How does the product compare with these alternative products?

10 questions to ask your FA representative

  1. Why is this product suitable for me?
    What type of product is this? Is it a life insurance policy, unit trust, or structured deposit? Is it primarily for savings, investment or insurance protection?
  2. What benefits does this product offer?
    Which benefits are guaranteed and which are not? Are there alternative products that offer similar benefits? How do they compare?
  3. What instruments does the product invest in? How risky are these underlying instruments?
  4. Ask the FA representative about their risk profiling method and basis for the eventual risk profile. Is the product suitable for my risk profile? Is this product low, medium or high risk?
  5. How much do I need to commit?
    Does it require a one-time payment or regular payments? What will happen if I find that I am unable to make the payment? What are the fees and charges?
  6. If the FA representative recommends investing with CPF monies, ask "How do the returns compare with interest rates earned by monies in your CPF accounts?"

    Tip

    CPF monies currently earn a minimum interest of 2.5% and 4% per annum, respectively. This is both guaranteed and risk-free.
  7. How long must I stay invested?
    What are the fees and charges? What are the penalties if I decide to liquidate some or all of my investments earlier?
  8. Is the FA representative regulated by the Monetary Authority of Singapore (MAS)?
    Check if he is listed on the MAS Register of Representatives.
  9. How is my investment monitored?
    What reports and updates will I receive? How often will I receive these reports and updates?
  10. What if I find that the investment product is not suitable after purchasing it?
    Can I return the product and get my money back? If so, how soon must I inform my FA representative of my decision to return the product? Are there any fees and charges?

Tip

By all means, ask more questions if you're still unsure about the product your FA representative is recommending.

Last updated on 05 Nov 2018