Tip no 2 – don’t invest in anything exclusive
Tip no 3 - don’t invest in anything that is not widely known or well established
Tip no 4 – you can’t entirely rely on the FMA or the government to protect you
Tip no 5 - just because an investment institution is big and glossy does not mean they automatically have your best interests at heart, or that you can trust them
Tip no 7 – if it is serious money you are investing, and you are using an adviser, deal with an AFA
Tip no 8 - only AFA’s are required to put their client’s interest first and act with integrity, and they are very much in the minority
Tip No 9 - Use the Fiduciary Test
Don’t invest in a fund unless:
- It has been in business for at least 3 years
- It has an established track record, and plenty of data available on it
- It is fully invested – money at work - not consistently holding lots of cash
- It is of reasonable size and is fully liquid - traded daily
- It has no withdrawal restrictions or long waiting periods
- It is not overly complicated
- You understand it
Tip No 10 – know what you are paying and whether the fees are adding value or not?
Tip No 11 – any investment you choose needs to fit into a properly designed and diversified portfolio.
Tip No 12 - what is the background of the company? What were they born out of? Do you feel comfortable dealing with this sort of organisation?
Tip no 14 - look past the charming person or presenter – way past. What matters are the values of the organisation behind them.
Tip No 15 – don’t be cynical, but enquire, enquire, enquire.
Tip No 16 - there is never any hurry to invest. Do your due diligence first.
Tip No 17 – seek out and only invest with principled companies and corporates, it will pay off in spades.
Tip No 18 - sorry but it’s worth repeating - learn all you can about diversification.
Tip No 19 - use Google, it is a great research tool. When using Google, put in the name of the company, or its CEO, or its parent company, plus a key word such as;
FMA or ASIC
Tip No 20 - seek independent advice from people who know their stuff. Make sure the advice is truly independent.
Tip No 21 – companies that pursue profits before all else will be “clipping the ticket” wherever they can with your investments. They are not always visible and they won’t lose all your money, indeed on the surface they may look OK, but they will be costing you.
Tip No 22 - liquidity – access to your money. Wherever possible you should seek investments that allow you to access your money without penalty.
Additional note- a lot of new cancer treatments are not paid for by the government, or medical insurance, and can easily cost $50,000 to $100,000 or more.
Tip No 23 - avoid investments with performance fees, for 3 reasons.
- Will they take on more risk than they should ?
- You need the returns from the good years for yourself, to help compensate for the odd poor year.
- Are they a tad greedy ? See Tip No 21.
Tip No 25 - "absolute return" funds promise/infer they will make positive returns in all market conditions. But according to a recent Daily Telegraph UK report, only 1 in 4 of them did so over the past 5 years. Again do your checking, and avoid the hype.
Supplied by Alan Clarke, financial & retirement adviser, & author.
His 2nd book “The Great NZ Work, Money & Retirement Puzzle” is now available.
Alan is an independent authorised financial adviser (AFA) FSP26532.
His disclosure statement is available on request and free of charge