I would like to ask from investment experts about how they evaluate new investmentr schemes before investment?

Heena,

Great Question! Its asked so many times from so many different people whether related to treasury, finance or credit. We do that all the time in our Asset Liability Committee Meeting, Treasury and even investment meetings. There so many interesting products. So many funds/ schemes time tested as well as innovative. Like bonds and their derivatives. Commodities and gold financing etc. 

Having said that, it is a broad question. Krunal has captured the "essence" of the answer in the points 1 and 3. The key to any investment is the risk/return profile. There are lot of factors to look at when determining how much an investor should be compensated for risk. Is it backed by Soverign guarantee for instance? Probably then I need not worry about the credit risk. But if it is a country that has defaulted on Soverign Guarantees like some African State, then there is credit risk.

I think there a short acroynm that captures the basics--- TURTL

T: Time, meaning my horizion. Do I need to make a short vs long term investment

U: What are my unique needs. My shareholders may not permit me to invest in any non-islamic product for instance.

R: Regulatory Considerations, like Provident Funds may not be allowed to invest in Mutual Funds in some countries

T: TAX- thats a huge concern. If I invest in stock and its a divident paying stock. I m in a heavy tax bracket, thats a no-no investment for me

L: Liquidity- How easy is it to covert the invesmtent to cash.

Whether you do it on a simulated model, excel or plain sheet of paper, the key thing is to understand what is being sold to you. To measure the risk/return and see if it makes sense. If it is too complex investment committees usually opt of it. Also the credibility of the manager is to extreme importance. When its my hard earned money, I will put my faith on the backing a strong investment team. Hope that helps!