×

STOP! Steps to take before saying yes to an investment

When it comes to new investment opportunities, it’s hard not to be excited about the potential of significant returns on your money. While it’s ok to be excited, researching the investment and the individual or firm offering it is crucial to avoiding painful and avoidable losses.

In a recent Investor study commissioned by the Alberta Securities Commission, it was noted that many Albertans spend more time researching cars and vacations than researching investments. Only 47% of Albertans did two or more hours of research on their last investment versus 69% with two+ hours of research on their last vacation, and 79% the last time they bought a car. Considering your hard-earned money is at stake, spending more time investigating your investment opportunities is worth its weight in gold.

You can make wise investment decisions and, more importantly, protect yourself from fraud by following these easy steps:

1) Check if your financial adviser or firm is registered

Verifying that the registration of the individual or firm offering it to you is legitimate is an essential first step when considering any investment opportunity. By law, most security industry professionals and firms are required to register with the securities regulator in each province or territory they do business in. Registration helps protect investors like you from investment fraud as it signifies that the person or firm is recognized as being properly qualified and compliant with investor protection laws.

But remember, while registration can tell you if an individual or firm can offer and sell investments, they cannot guarantee their performance or success with your money.

2) Review the investment against your financial plan

When buying a vehicle, there are many different factors to consider from the number of passengers it can hold to the cost of maintenance and safety. Investments are no different and no one investment is suitable for everyone.

Create or review your financial plan that maps out what you’re looking to achieve with your investments. Saving for retirement? Investing for a down payment on a home? Along with your risk tolerance and willingness (the amount of money you are able and comfortable potentially losing ), your future goals and their associated timelines are all relevant details to consider before saying yes to any investment opportunity.

3) Understand what you’re investing in

Diversifying your investment portfolio across different industries is a great strategy to try and minimize any potential losses. When it comes to choosing investments, it is also critical to conduct research to understand the market, company, business and investment opportunity, and ensure it is credible. This is especially important in the fast-moving and volatile technology industry and emerging industries like cannabis and cryptocurrencies.

Conducting research also helps protect yourself from fraud. Scam artists often rely on investing trends to grab your interest and try to dissuade you from doing research that will quickly show the scam for what it is.

4) Know where to go for help

When it comes to investments, it is beneficial to walk through it with someone who is not involved. Lawyers and advisers can help you review the opportunity and identify details you may have missed, including unsatisfactory fees and even potential fraud.

A clear red flag of fraud is if you’re told to keep an investment opportunity secret. Scam artists use this tactic with the hopes that no one will call out anything suspicious. No credible adviser or firm should ever encourage this; if this situation happens to you, contact the Alberta Securities Commission and discuss it with a specialist.

Don’t let expectations of a great return gloss over the risks of any investment. Just as you take the time to thoroughly review a new car to ensure it’s not a lemon or plan the activities you want to do on your upcoming vacation, investments need the backing of proper research and planning to avoid potential negative results. With these four steps, you can make safe, suitable and informed investment decisions for your future.

 

 

Stock market drop shown on tablet
Couple talking with their financial adviser