FMA says: “Take a MO before investing in FOMO”
Supplied Content
Wellington, October 5, 2021
The Financial Markets Authority (FMA) has urged Do It Yourself online investors to consider the challenges and risks before succumbing to investment Fear of Missing Out.
The advice came as the market marks the World Investor Week (October 4 to 10, 2021)
FMA research on online investing platforms found that 31% of all online DIY investors jumped into an investment in the last two years because they did not want to miss out. Additionally, 27% of the respondents said that they invested based on a recommendation from someone they know without doing their own research.
Five important steps
FMA Investor Capability Manager Gillian Boyes said that investors should follow five important steps, which are 1. Do your due diligence 2. Drip feed your investments 3. Diversify your portfolio 4. Don’t freak out if markets go down and 5. If in Doubt, talk to a financial adviser.
FMA is focused on ‘Planter Investor,’ a DIY investor type identified in the research. Planters account for 42% of DIY investors, followed by speculators (20%) and opportunists and dabblers (19% each).
Mr Boyes said that planters tend to be comparatively younger with a female skew and see DIY investing as a significant part of their financial strategy.
“Our research found planters have 52% of their investment portfolio in online investing platforms. This suggests they are putting a large portion of their income into DIY platforms and may have more to lose in a market downturn, with larger portfolios and less time to recover. Planters have good intentions around investing but don’t always research potential investments thoroughly, such as making decisions based on whether a company is well-known. We want to use World Investor Week to remind DIY investors about good investing habits and steps they can take to protect themselves,” he said.
Questions to be answered
FMA encourages planters to ask themselves some important questions before making an investment as a part of due diligence, he said.
These include (1) Will the investment earn an income? 2. Do I understand the company in which I am thinking of investing? 3. Is the share price reasonable? 4. What fees or costs are involved? 5. How can I get my money back? 6. Is it a legitimate offer?
Terry, a planter, started his investment journey a few years ago when a group of his friends started a monthly investment club, each contributing $100 and choosing a new investment monthly. Terry said that he enjoyed how DIY investing allowed him to learn more about financial products and how the share market works. He believes that it is important to have a diverse financial portfolio and part of that involves investing in shares. He is interested in medium to high-risk investments with a long-term horizon and isn’t in it for quick money.
About World Investor Week
The annual World Investor Week is sponsored by the International Organisation of Securities Commissions.
The FMA is the lead agency for World Investor Week in New Zealand and is running with the theme, ‘Investing FOMO? Take a Mo’ in partnership with the Retirement Commission, NZX, the Financial Services Council, the New Zealand Shareholders Association and several private sector organisations.
The FMA will be sharing the Five D’s of DIY Investing throughout the week.
