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Investing can help you save—and grow—your money. You may want to save to reach certain life goals, like funding your child’s education, helping buy your first home, or funding your retirement. There are many ways you can choose to invest your savings, and different investment products available. Before making any investment decision, it is important to understand the basics on how investments work—and you may want to consult with an investment professional for help.

Follow these steps to be an informed investor:

1. Check Registration

If you decide to work with an investment professional, choosing the right one may be one of the most important financial decisions you make. Checking an individual’s or firm’s registration category or licensing status helps protect investors. FCNB will register firms and individuals only if they are properly qualified and meet a certain standard. Their category or status will also tell you of any restrictions (known as “terms and conditions”) imposed on them by FCNB or other regulators.

There are many different types of financial and investment professionals who offer different products and services. Don’t rely on a title on a business card. Do your homework and be sure they have the proper licence or registration to provide the products or services you need.

Visit “Working with a Financial Professional” to learn more about registration, how to choose an investment professional to work with and to download free tools and resources that can help you make informed investment decisions.

Check Registration

2. Have a plan

Financial planning will help you figure out your current money situation and how to get where you want to be financially. A financial professional can help you put together a comprehensive financial plan that is detailed and includes information about things like your current financial situation, tax and estate planning, insurance, current and future sources of income, and investments and risk tolerance. In investing, generally the higher the potential return, the higher the risks. So, if you want higher returns, you have to be prepared to accept the risks that go along with them.

Visit “Working with a Financial Professional” to learn more about how to develop an investment plan and download free tools and resources that can help you make smart and safe investment decisions.

3. Be informed

Before investing be sure you understand how the investment works and what fees and risks are associated with it. Talk to your investment professional or do your own independent research to understand:

  • How does the investment make money? Does it pay dividends or interest?
  • What fees or commissions do you have to pay to buy, hold, and sell the investment?
  • What effect will these fees have on the overall value of your portfolio? Is it better to pay fees out-of-pocket or from your investment portfolio? Are these fees tax deductible?
  • What has to happen for the investment to increase in value? How much does the investment have to increase in value for you to break even or make money after all the fees are paid?
  • What specific risks are associated with this investment? What effect would a change in interest rate, a recession, or market changes have on the value of your investment?
  • How easy would it be to sell the investment if you needed your money right away? Are there restrictions on how long you must hold the investment or are there penalties for selling the investment early?
  • Does the investment suit your goals and risk tolerance? Understanding your tolerance for risk will help you choose investments that are right for you and your financial situation.

Where to find information

Disclosure documents such as a prospectus or annual report can be a good source of information about the issuer or company. A prospectus contains facts about the securities being offered to the public. It includes information about the history of the issuer of the securities and its operations, a description of the securities being offered, financial statements, a summary of the major risk factors that affect the issuer, and how the money raised by issuing the securities will be used. Your investment professional can provide you with disclosure documents or you can download public company’s or investment fund’s disclosure documents from the System for Electronic Document Analysis and Retrieval (SEDAR).

In certain cases, securities can be sold without a prospectus. These are called “exempt market securities.” When buying without the benefit of a prospectus, you don’t get the same amount of information to base your decision on. Without this information you may be taking more risk with your money.

Exempt market securities are risky and are not for everyone. There are strict rules about who can buy exempt market securities. Unfortunately, some issuers abuse the system by selling their securities to unqualified investors who don’t understand the requirements, risks, and resale restrictions that often apply to securities sold without a prospectus. For more information, visit our section on Securities Exemptions.

You can also find information about the companies you invest in from a variety of other sources, including media, newsletters, analysts’ reports, and the company itself. Remember, this information only forms part of the overall picture of the company. Be critical of what you read and never base your decision solely on websites, unsolicited emails or company news releases. Staying informed after you invest also helps you protect your money.

4. Understand your risk tolerance

Risk is the potential that you could lose some or all of your investment. Each investment involves some degree of risk. Generally, the higher the risk, the higher the potential returns, and the lower the risk, the lower the potential returns. All investors want to earn returns on their investment – but it is important to understand your risk tolerance. Your risk tolerance is a measure of how much risk you are willing and able to take with your investments.

Risk is a measure of how much the current price of an investment varies from its average price. An investment that’s price varies a lot and quickly is considered more volatile than one that stays relatively consistent over time.

Different investments carry different amounts of risk. Although there is no such thing as a truly “risk-free” investment, some investments, such as Canadian treasury bills or deposits in your bank account, have such low risk they are sometimes considered risk-free. Investments such as shares (equities) generally are more volatile because their prices tend to move up and down quickly and sometimes by a lot. This makes them a riskier investment.

Your investment professional can help you choose investments that will both help you achieve your goals and stay within your risk tolerance.

Review our Guide to Types of Investment Risk to learn what kind of risks you may be exposed to.

5. Recognize and avoid fraud

Investment fraud comes in many different shapes and sizes. But even though a scammer’s pitch may change and evolve with the times, the red flags of fraud tend to be common across all different types of scams. Knowing what to watch for and how to report a scam can help protect not only yourself, but your family and community.

Visit Frauds and Scams to learn the characteristics of different frauds and how to report them.

Sign up for our fraud alerts to be notified about frauds targeting New Brunswickers.