Tips for Safe Investing: Understanding Risks and Avoiding Investment Losses

Tips when Investing

All investment instruments carry with them differing inherent risks, from low to high. It is important to understand the risks associated with each investment instrument and to carefully consider your investment goals, risk tolerance, and time horizon before making any investment decisions. These risks can arise from various factors, such as market volatility, economic conditions, interest rates, inflation, geopolitical events, regulatory changes, company-specific factors, and other factors that can affect the performance of the investment. Clarifying, understanding, and managing these investment risks when deciding to invest is a fundamental component of becoming an informed investor.

While there are various avenues for seeking financial redress, such as the courts and SIDREC, it is prudent for investors to exercise certain precautions so as to avoid suffering investment loss from investment risks that could have been avoided.

Useful tips to employ

Recovering money from unlicensed entities can be challenging and is often unlikely. Therefore, you should always first verify that the capital market intermediary is registered or licensed by relevant authorities such as the Securities Commission Malaysia, Bank Negara Malaysia, Bursa Malaysia, and Federation of Investment Managers Malaysia.

Secondly, never hand over cash to your remisiers, unit trust consultants, or any other agents or deposit money into their personal accounts. Remember to only deposit money directly with your licensed capital market intermediary. Money that has been handed over directly to individuals may be more difficult to recover when there is a dispute.

Thirdly, keep your investment documentation and records in proper order. Insist on payment receipts and confirm that details of all transactions affected, as reflected in contract notes, daily statements, or statements of transactions are all accurate. This enables you to track investment performance and to be aware of potential investment losses.

Fourthly, do not share your bank account, credit card, or online investment account details with anyone.

It is essential to ensure that you fully understand your rights and responsibilities concerning your investments, as well as the associated risks. It’s normal to feel unsure or uninformed about an investment and the risks involved. However, it’s crucial to ask any questions you may have and seek clarification from a trusted financial advisor before making any investment decisions. You should also conduct an independent risk assessment for each investment to determine its potential risks and rewards. By doing so, you can make informed decisions to mitigate potential losses. Remember that being well-informed is key to successful investing.

Red flags to look out for

There are red flags to look out for that include aggressive persuasion tactics such as investments sounding too good to be true and being pressured to make a decision.

If you feel pressured or rushed into an investment product, exercise caution and prudence. Remember, you have the ultimate decision-making power when it comes to your money. It’s essential to take the time to carefully consider any investment opportunity before committing your funds. If you find it difficult to make a decision, don’t hesitate to defer it until you are comfortable with it. Don’t feel obligated to join others or succumb to external pressure. After all, it’s your hard-earned money, and the choice of where to invest it ultimately rests with you. Taking a deliberate and thoughtful approach to investing can help protect your financial interests and increase your chances of achieving your investment goals.

You must also be wary of investment advice or tips promoted through social media channels by unlicensed investment advisers. Engaging or proceeding on the advice or using the services of unlicensed individuals or entities will leave you vulnerable to even more risks than the typical ones associated with investing, as well as being exposed to investment loss that may not be as recoverable. 

Getting help for victims of fraud/scams

If you suspect that you have been a victim of fraud or financial scams, file a police report as soon as possible. This will start the process of potentially recovering the money by investigating the fraud and providing you with a report that can be used in court.

Alternatively, you may contact the National Scam Response Centre (NSRC) hotline at 997. The NSRC is established to coordinate rapid response for online financial scams which includes coordinating faster recovery of stolen money and enforcement action against criminals. This is a joint effort between the National Anti-Financial Crime Centre (NFCC), the police, Bank Negara Malaysia (BNM), the Malaysian Communications and Multimedia Commission (MCMC), as well as financial institutions and the telecommunications industry.