Sometimes investments fail and small investors lose money through no fault of their own. What steps can you take to make sure that doesn’t happen to you?
Mark Rantall, CEO of the Financial Planning Association, says all investors need to be careful not to fall for complicated financial products that promise big returns, unless they fully understand the risks.
Here are some simple questions you should ask yourself before falling for the latest investment scheme.
1. Is it just too difficult to understand? If the person selling you the product can’t answer all your questions about how it works, don’t give them your money.
2. How high are the returns? Promises of outstanding returns over short-time periods are usually signs that an investment can be “too good to be true”
3. Have you done your homework? Our investment laws are based on disclosure. All the investment provider has to do is give you the information. It’s then your responsibility to read and understand it
4. Have you asked enough questions? You will be given a Product Disclosure Statement (PDS) and a Financial Services Guide (FSG). Read them carefully and ask as many questions as possible to ensure you’re not being misled or simply misunderstanding what’s on offer
5. Do you understand the risks? Unless an investment is capital guaranteed, it is possible to lose the money you put in so make sure you understand all the risks involved.