Featured Image Credit: FCA
Remember that GameStop saga a while back? It was wild. But it also showed how important it is to know your stuff before jumping into the investing world.
Wherever you’re at in your investing journey, here are 5 things to know to level up your investing game.
Know your game
Don't just follow the hype train – understand what you're investing in. It's like choosing your character in a game; each has its own strengths and weaknesses. There's a whole world of investments out there, from shares in companies to more complex and high-risk options like crypto, contracts for difference (CFDs) or forex (foreign exchange) trading.
Ask yourself: What am I actually investing in? How does it make money? Who's running the show? And, most importantly, can I access my money if I need to? Don't be afraid to ask questions until you get it.
Remember, if an investment sounds too good to be true, it probably is.
Risk in the game
Every investment has some risk, some more than others. It's like choosing the difficulty setting – higher risk, higher potential reward. Make sure you're okay with the ups and downs.
Can you handle it if your investment loses some value, or even all of it? If you're going for those big gains, are you prepared for the potential losses?
Diversification is key here. Spread your investments around, so if one doesn't do well, others can help balance things out.
Check the rules
In the UK, many companies are regulated by the Financial Conduct Authority (FCA). This means they have to follow certain rules to protect you. It's like playing on a fair and balanced server. But, there are some things they don't regulate, like investing directly in crypto or commodities like gold.
If things go wrong with unregulated investments, you likely won't have the same protections from the Financial Services Compensation Scheme (FSCS) or be able to access the Financial Ombudsman Service (FOS). So, it's important to understand the rules before you jump in. The FSCS was set up to provide compensation under certain circumstances if an authorised firm can’t pay claims against it, and FOS settles complaints about authorised firms.
Safety first
Before you invest, find out what happens if things go south. If you're dealing with a dodgy company, you might be out of luck if they disappear. It's like not having a respawn point, it’s game over.
Check the FCA Register to see if a company or person is authorised before you invest.
Ask for help
If you're feeling lost or just want a second opinion, talk to a financial advisor. They can help you create a plan that fits your goals and how much risk you're comfortable with.
Once again, just make sure your guide is legit, by checking that any advisor you talk to is also regulated by the FCA.
The bottom line
Investing is a long game, not a quick win. It's about making smart choices, being patient, and knowing that there are no guarantees.
Remember, if an investment sounds too good to be true, it probably is. Do your research, ask lots of questions, and never invest more than you can afford to lose.
To learn more, check out all the information from the FCA on their InvestSmart hub here.
