Do not be fooled by investments

The public should be well educated on the different types of investments available and the risks that go with it. Many are ill-informed and have developed a negative perspective towards investments. Probably this negative perception are formed through the many losses that a person has experienced over the years. Some shun investing altogether. They are not to be faulted. After all, they are just human. Nobody wants to see their hard-earned money depreciate over time. One of the ways to minimise your risk of losses is to do your homework first. Read up on the investment that you are investing in. Know the risks. Read the disclaimer before signing on the dotted line. Once you understand the risks, it is then that you should know what will be eating your future returns. What I mean is the costs that comes with investing. Lets see some of the common financial instruments:

• Stocks Know how much brokerage fees you are paying. Get a broker that gives you a good after sales service. Find out whether there are any minimum trades per month(this applies more to foreign based brokerage).

• Unit trusts Know the fees involved. Is there any platform fees. Do not be fooled by sales tactics. For example, if you are charged at 7% upfront, it will reduce your future returns significantly. Upfront fees, ongoing fees, platform fees, management fees and many more. Do your due research and compare between different product providers. Unnecessary charges can really eat up your returns in the future.

• Leveraged investments Higly leveraged investments contain significant risks to the un-informed investor. Hedge funds, derivative financial instruments like stock options, CFDs and Warrants all carry more risk than the normal 'long-only' investments. However, huge gains await those who know how to capitalise on market movements and huge losses occurs for those who do not. Investments on the whole creates a great hedge against inflation.Be it investing in fixed assets or paper assets. Therefore, do not be fooled by advertisements promising erroneous returns.

If its too good to be true, it is too good to be true.