Visit Before You Invest over the following 12 weeks for our summer Investments at Glance guide. With the help of the Canadian Securities Administrators, we have written this series to tell you about different kinds of investments and some things to keep in mind when you’re considering an investment. The aim is to help investors learn more about their investment options.
We will look at investment classes, including cash, fixed income, equities and alternative investments, and take a closer look at some of the more common types of investments you might encounter.
Before you invest, make sure you understand how an investment works, including any fees, and whether it fits with your goals and risk tolerance. With investing, the higher the potential return, the higher the risk. There’s no such thing as a high return, risk-free investment. If you want higher returns, you have to be prepared to accept the risks that go along with them.
Income tax is another important consideration. Interest, dividends and capital gains are all treated differently for tax purposes and that will affect your return from an investment. A registered adviser can help you assess your financial needs, goals and tax situation. An adviser can also help you build a portfolio and recommend suitable investments for you.
Whether you have an adviser or invest on your own, don’t invest in anything that you don’t fully understand. Take your time when making investment decisions and never sign documents you have not read carefully.
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Investments at a Glance
These days, everyone has a website. Your neighbour’s kids have blogs or websites as professional looking (or more) than many legitimate businesses. The lesson here: just because a company has an impressive website does not mean they are a smart or legitimate investment. You have to look further.
First of all, even if the business is legitimate, remember that this is their website – their tool for communicating to their customers and investors. Do you really expect them to tell you that sales are low, that they’re laying off workers and they are running a deficit? Of course not. Even when they do disclose bad news, they will do their best to make it sound as cheery as possible. If you want the real story, keep looking.
Remember your neighbour’s kids? Anyone can build a website. What proof do you have that this business even exists? Fraudulent business and investing websites are being created all the time – as fast as, or faster than regulators can have them taken down. They offer fantastic rates of return, deals you can’t get anywhere else. And they make it all sound so easy!
How can you tell the real sites from the fake ones? Truth is, you might not be able to, but you can do your best. Check the website out carefully. Is it short on details? Vague on the day to day operations of the supposed business? Fraudulent websites often offer few details and no contact information, or when they do it is only an email address or a contact form.
Sometimes, a con artist will go as far as to copy the website of a legitimate business. The whole website. Right down to the pictures and bios of the staff and board of directors. They will change the business name and web address, and any email or telephone numbers, and pass the website off as their own. Scammers are clever. Always get a second opinion. Or even a third and fourth.
See what other people are saying about the business. Google them. If no one else is talking about them, maybe there is a reason. Check with the Better Business Bureau. You can also get information from:
- analysts’ reports
- financial newspapers and websites
- investment newsletters
- chat rooms and online communities
You can get a lot of useful information from these sources, but remember each source only forms part of the overall picture of a company. Be skeptical of what you read and check as many different sources as you can to get a more complete picture. You can also get a second opinion from an independent financial adviser.
Remember it is your money, so if it sounds too good to be true… it probably is.
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advisers,
fraud,
internet,
scams
