Know your investment

Investing basics

The complex world of stocks, bonds, mutual funds and options can be intimidating for many of us. We know the importance of earning a return on our money and planning for our retirement, but we may not know how to start an investment program that will meet our financial goals.

DO

• establish clear and reasonable investment objectives before you invest. Discuss those objectives in detail with your financial advisers.
• select you advisers carefully. Ensure that they have the qualifications and experience required, that they are properly registered in your jurisdiction and that they can provide the services you need. See choosing an adviser for more information.
• remember that there are risks in any investment. As potential profit increases, so does risk. Don't take risks you can't afford or aren't comfortable with. Take our risk test to gauge your appetite for risk and read more about understanding your tolerance for risk.
• diversify your investment portfolio to decrease your overall risk.
• select the appropriate asset mix of debt, equity and cash equivalents.
• recognize the limits of your knowledge. Avoid investments you don't understand. Use our glossary to help understand the terminology.
• know the rules for raising money and if a company can sell its securities to you without an offering memorandum
• your homework. Be sure you know what you are investing in and what impact it will have on the risk, potential returns and marketability of your portfolio.
• understand basic investment types and investment characteristics.

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DON'T

• invest on the basis of hot tips and rumours. They are seldom right. Besides, trading on inside information is illegal.
• blindly follow investment advice that you don't understand.
• be afraid to say NO to the suggestions of your financial adviser if you are not convinced the investments are right for you.
• ignore the red flags of investment scams.

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