Investment warnings

If you’re considering investing in something everyone is talking about, do some checks first. If it sounds too good to be true, it probably is.

Watch out for investment hype

Investment hype is where something is widely promoted and creates a lot of buzz. You may hear about it on social media, in the news, or in online forums. Often the messages of high earnings are repeated.

Investment hype is created through:

• Fear of missing out – peer pressure to be part of ‘the next big thing’, or triggering regret if you don’t invest
• Trust – an investment is promoted by someone you listen to, like a social influencer or media personality
• Timing – pressure to invest now or ‘you’ll miss out’, creating a sense of urgency

When you’re in the thick of it, hype-driven investments can be hard to recognise. They often end badly so it’s important to be cautious.

How to avoid investment hype

Sometimes it’s hard to avoid rushing in. There are things you can do to slow down and make an informed decision.

Understand what you’re investing in

If you don’t understand how an investment makes money, or you can’t explain it clearly to someone else, do more research before you invest.

Read offer documents, like the product disclosure statement (PDS). This tells you an investment’s key features, returns, fees, and risks.

Or you can check ASIC’s Offer Noticeboard database for disclosure documents. If there are no offer documents, this is a red flag.

Don’t rely on celebrities for investment information

Celebrity or influencer endorsements are often motivated by payments or other benefits they receive. Do your own research on the investment to make the best decision for your circumstances.

Watch out for ‘get rich quick’ schemes and scams

Fake experts can often promote investments in front of flashy cars or properties. Sometimes they claim to be able to ‘double your money’ quickly. High returns usually mean there’s a higher risk of losing your money.

Beware of surprise offers to invest in something that’s being talked about a lot. Scammers use the hype around ‘hot investment topics’ as an opportunity to trick people out of their money.

Check a company is licensed

Check that a company or product issuer is licensed by ASIC to advise on or offer an investment. Search ASIC Connect’s Professional Registers for details of their Australian financial servcies (AFS) licence.

If they’re not there, or the details don’t match, don’t invest.

Consider your investment goals

Take the time to consider if an investment aligns with your goals. Planning is the key to successful investing, so it’s important not to rush decisions. Speak to us about developing an investment plan.

Get professional advice if you’re unsure 

If you’re unsure about an investment, we can help.

Check investment warnings

Keep informed about financial services scams through the Australian Securities and Investments Commission (ASIC) scam alerts.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/investment-warnings

Important note: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. Past performance is not a reliable guide to future returns.
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