The basics of investing and investor resilience
By Rachael Chinery, Senior Manager - Investment Business
This is part of a series of blogs from the JFSC team for World Investor Week 2024, an IOSCO initiative to advance investor education and protection.
You’ve worked hard for your money, and now you wish to invest it, whether for the short or long term. It’s important to be informed, safe, and smart. Remember, this is your money, and every decision matters.
Start by considering what you can afford to invest—and potentially lose. Depending on the risk level of the investment, it’s possible you could lose some or all of your capital. Clearly define your investment goals. Are you saving for your children’s education, a new home, or retirement? Also, decide how long you wish to tie up your money—3-5 years, or even longer? Determine whether you’re looking for capital returns, income, or a combination of both.
Understanding your risk tolerance is essential. How much can you afford to lose before it starts to impact your peace of mind? Carefully choose what you want to invest in and ensure it aligns with your aims, needs, and goals. Pay attention to the income or capital you may expect, as well as the investment risk and strategy.
Don’t be an easy target for fraudsters. If something seems too good to be true, it likely is. Be cautious of high-pressure tactics or overly friendly approaches. Fraudsters often impersonate firms or individuals, aiming to lure you in. Always use a reputable, regulated firm for advice and take your time to assess before making any decisions. This is your hard-earned money—protect it by being aware, cautious, and thoughtful.
Investor resilience
A resilient investor is prepared for life's unexpected challenges. They plan effectively, using budgeting strategies to manage risk, minimise the impact of inflation, and avoid high-interest debt, such as credit cards. If you’re looking to improve your resilience as an investor, here are some key points to consider.
Diversification is vital—never put all your investment eggs in one basket. If one asset falls in value, others in your portfolio may do better, helping to smooth returns and reduce overall risk. Additionally, investing for the long term helps to even out the ups and downs that can happen along the way.
Life is full of unexpected events—pandemics, wars, and high inflation are just a few examples from the past four years. It's wise to focus on paying down debt before you invest. Set clear savings goals and amounts, and consider setting up a direct debit to invest regularly, helping to average out costs over time.
Ensure you have a financial safety net with enough money to cover three to six months of living expenses. And never expose yourself to losing more than you can afford. Take the time to research and understand any investment before committing. Take your time to assess and consider your options.