Guide to Investing safely and smoothly to avoid scams
| Date: July 31, 2010 | Source: Sources |
| Category: ECONO-TIPS | |
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Loading ... In summer proliferate miracle products that ensure we will lose weight and look a splendid figure in a few weeks with the only effort to take these pills or potions final. It's the same with investments that promise spectacular profits without risk or profitability exaggerate or minimize the risk or, quite simply, are a scam.
Before going into depth with the theme, elemental track non-professional investor you should put on red alert: investments promise monthly returns above 20%. Such revenues are only available to exceptional investment professionals, such as Warren Buffet.
What kinds of risks?
We're used to hearing that investments are safe or are at risk. We could define risk as the probability of an event occurring (favorable or unfavorable) associated with the returns (higher or lower real return on investment), the cash flows (cash or not cash a dividend of one share, for example) or the value of an asset (for example putting a market price for a home today).
Here are some types of risks to consider:
A. - The no investor should ever face: the risk of fraud. Obviously we are not announcing that the product we offer is a scam, we know the basics of financial product, analyze the professionalism, history and creditworthiness of the issuer and the company selling the product.
2. - Pure risk: losing the investment associated with adverse events in the style by fire or other disasters, accidents or bankruptcy of the issuer of the investment product (it is not very far for Spanish investors bankrupt American investment bank Lehman Brothers).
3. - Operating or financial risk: internal or external factors that may affect the business such as changes in markets, different strategies of competitors, general economic crisis or in specific sectors, changes in asset prices underlying the investment (which raise the price of gold by investing in companies that sell this product, for instance) or changes in legal regulation, among others.
4. - Risks related to profitability: It is said that an investment is at risk if you do not have a guaranteed return. In this type can include the risk of losing money by the nature of the investment product. Stocks, for instance known to all, are at risk because of its profitability (which could be equated to the company distributes dividends) and its price (you can lose money if we bought the shares fall in price and we have to sell for liquidity). 5. - Liquidity risk asset: time or difficulty of making investment in liquidity (money). Today's homeowners need to sell have run smack into this problem: the houses that used to be sold without problems now very difficult to sell even at a loss. 6. - Inflation: If you believe that the best way not to take risks is not investing your savings is to leave them in your bank checking account, think again. Generalized inflation or price rise, is eaten every year the value of your money. To avoid losing money, at least have to get a fixed term at the bank that offers a return equal to inflation.
GETTING TO INVEST IN
It seems self-evident, but not so never invest in a product you do not understand. Not as easy as it looks if you just trust the employee of your bank that suggests that investment fund with a name so overblown is a great investment and is "as safe as a fixed term" regret it. The workload and lack of expertise of many bank makes its advice is not enough to decide for either product. We must understand how it works.
To summarize very briefly the most common investment products with which they usually encounter, we might mention: Public Debt of the State: We could say that is the risk-free asset par excellence. We give a guaranteed return without risk (in fact there is always the sovereign risk, which breaks the state as happened to happened to Greece and could not pay their debts). They are known for state bonds, to differentiate it from the fixed income and private companies. Time deposits of financial institutions: Technically known for IPF (time deposits). In a normal situation often have a certain profitability below Euribor (taking the reference banks and the cost of money for them). They are safe investments, unless breaking the entity (in the case of Spain the Deposit Guarantee Fund insured up to 100,000 euros per person per financial institution).
Structured bonds: corporate bond product that has many problems as it is of high complexity (they are products that combine a secure investment with a financial derivative) and has been marketed to retail investors in a somewhat massive. It combines a guaranteed return product with a financial derivative. For simplicity, an issuer (Company A) is issuing this bond that can not ensure or total investment, with a return that depends on the evolution of some underlying asset (eg the value of 3 actions), a bank (Bank X) markets the bond commission charging for it and invest in a particular product (usually each bond costs 50,000 euros). Any problems serious happened with the bankruptcy of Lehman Brothers? That was the bond issuer (Company A), marketed by Spanish banks (Bank X). The issuer bankruptcy, Lehman Brothers, and the investor can not claim, in principle, the bank has "sold" the bond. Have to wait to settle Lehman Brothers to see that some of their money recovered.
Actions: Title negotiable in different bags that are a percentage of ownership of it. Equity is best known for the ordinary investor. The risk of this investment is both profitability and price as also the bankruptcy of the company. Consider that the shareholder is, in fact, a business owner, is the latest to charge if the company has to liquidate.
Mutual funds and ETFs ( Exchange Traded Funds Investment ): In this type of product you buy shares in a basket of products in which the Fund invests. Normally are baskets of stocks of certain markets or sectors chosen by the policy of each fund manager. ETFs are a new type of investment funds that are listed and can be bought and sold like stocks, as they have money at all times. Instruments are more complex and, as the need to invest in indices, gold and many different investments, plus the need to earn if the Ibex (short or ultrashort ETF s), for example, and others who earn if it rises .
Products
: Its value depends on the evolution of so-called underlying asset (shares, indices, commodities and so on). The best known are futures and options. Futures are a compromise between two parties by which at a future date a party to buy something and the other is obliged to sell it. A future on a stock at a price of X euros and due date XX / XX / XXX means that when this date arrives one is obliged to buy the stock for X euros and the other to sell, worth what it's worth in reality this action that day. The options which entitle the purchase (paying a premium to the seller) to buy (call option) or sell (put option) the underlying asset at a specified price at a future date. So who buys the option may or may not exercise it. There are already products of complexity must remove the unskilled investor.
Investment "exotic" for the amateur investor
In this section we include any unusual product for the normal client, often marketed by nonbanks. You should never invest in these instruments without knowing the product well, the issuer and the intermediary who sells it. We could mention the outright purchase of gold bullion, investments in the Forex market currencies, promissory emissions of certain private companies.
ANALYZE THE ISSUER AND INVESTMENT BROKER
It is very important to understand the product in which it invests, but equally essential is to know who is issued or sold. Knowing your basic data, solvency and career.
The network provides all this information in a fast and a very low cost:
A. - Info own company website: what can obviously interested, but information is starting. If no web, no need or follow. Do not invest in it. Another very useful information that can be extracted from their website is indirect: Can you see the name, tax domicile and contact details? If the answer is no bad start, as are mandatory by law. The same applies if you have a contact section and has its privacy policy and the rights that the Law on Protection of Information (Act) provides to users. There are indications that fails the professionalism of the company, at least.
2. - Google and other search engines: It's amazing the information that we obtain with the simple precaution of putting the company name into a search engine and visit the links. Carefully read the pages that criticize the company or its products and why.
3. - Social networks: Facebook, Twitter, LinkedIn or Xing are abundant sources of information. Visit the profiles of the company, employees who claim to work on it and what users say.
4. - Blogs about: The financial blogosphere allows us to be well informed, independent professionals often, and make our doubts about the company that offers an investment or on the nature of the product itself.
5. - CNMV and Bank of Spain: Official information about organizations that are behind the investment. If not included in your records, do not invest in them or, at least in these entities advice on business and investment. They have created a helpful page for non-professional investors called Finance for all.
6. - Registry and Land Registry: We provide public information on the balances of the entity and its properties. Balances with steady losses or companies are no bad omens property investors.
7. - Companies specializing in business analysis: Perhaps the most used is einforma. For little cost you can have a full report on the solvency of the company.
We conclude the entry noting that investing is not something to be taken lightly nor made in haste. You have to know the product is invested and the company offers investment.
If they put us in a hurry, we say it is a unique investment for a limited time, overwhelm us with technical and assure us that there is no risk and always wins, I recommend caution, well informed and never put your money in the hands of companies that do not know well. It is not the thing to throw money.
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