Although every investment is a risk, sometimes it is possible to mitigate these risks, or at least be aware of them, by doing some groundwork and gathering information.
But before you start investing, it is worth figuring out why you want to invest. Take a look at your wallet and make sure you have enough money to invest and, should your investment fail, to lose it.
Here are five basic recommendations:
- Before investing, ask yourself the following questions:
- How much can I invest and do I plan to do this every month or once with a certain amount?
- How much return do I expect on my investment?
- How much am I willing to risk and what is my risk tolerance?
- How long do I want to invest, ie for how long am I prepared to tie my money to the investment?
- Do I need professional help to invest?
- Which fees are involved with investing and how much are they?
- What if I want to use my money sooner than initially planned? Can I get my money immediately and will that entail any additional costs?
2. Familiarise yourself with different investment opportunities and make sure to check the background of the company. Companies offering investment services in Estonia must be registered and they are supervised by the Financial Supervision Authority. The list of market participants is available on the website of the Financial Supervision Authority.
3. The rule of thumb of investing is that higher return usually involves higher risk. Be wary of being promised a high return with low or no risk because it is likely to be a scam.
4. Never put all your eggs in one basket – you can reduce risk by diversifying your investments across various instruments, as well as across economic sectors and countries. It is also important to diversify your investments over time and understand that time works in your favour in long-term investment.
5. If you have decided on an investment method, remember to regularly monitor how your investment is doing and make changes if necessary, taking into account your investment horizon and goals.
Gerli Hall, a lawyer at the Financial Services Supervision Department of the Financial Supervision Authority
