Investment Guide

Investment Guide

AFSA has prepared the following information to give a general introduction to investing and investment products.

Investing is commonly seen as a way to grow the value of money and to help protect it from the long-term effects of inflation. However, all investments involve risk and are generally considered riskier than simply placing money in a bank deposit. Investment products differ in their level of risk and complexity, and not every product is suitable for every investor.

Common Types of Investments

Equities (Shares or Stocks)
Equities represent direct ownership in a company. Investors purchase shares with the expectation that their value will increase over time and/or that they will receive income in the form of dividends paid by the company.

Collective Investment Schemes
Collective investments, often referred to as funds or ETF (exchange traded funds), provide an alternative to buying shares directly. By pooling money with other investors, individuals gain exposure to a wide range of companies and assets. A professional fund or investment manager allocates the combined capital, often across multiple sectors or even global markets.
Because pooled investments spread risk across many holdings, they are generally considered less risky than investing in a single company’s shares. However, the value of these investments still fluctuates with market conditions and may decline.

Debentures (Fixed Income Securities)
Debentures are debt-based instruments in which an investor lends money to a company or government in exchange for a fixed income payment (yield). Each debenture has a maturity date when the original sum is repaid. They can also be traded on the bond market, where their value is influenced by interest rates, the creditworthiness of the issuer, broader economic conditions, and the relative attractiveness of other investments such as equities or bank deposits.

Risk

All investments involve risk. Before making an investment decision, you should carefully consider your personal attitude to risk and how it influences both your willingness and ability to invest and review risk associated with a particular investment of financial product.

People view risk differently. Some are comfortable taking on higher levels of risk in the hope of achieving greater returns, while others prefer security and focus on protecting their initial capital.

When thinking about investing, ask yourself how you would react if your investment lost significant value. Would you see it as a temporary setback and keep your money invested—or even add more—in the hope that values recover over time? Or would you feel uneasy and prefer to sell quickly to avoid further losses, even if that means accepting some loss? There is no “right” answer—it depends on your personal risk tolerance, your investment timeframe, and how soon you might need access to the money.

Questions to Ask Before You Invest

1. How much can you afford to invest?
   Investments should normally be made with surplus funds—money you don’t expect to need in the short term. Before investing, it may be wise to ensure your protection needs (such as insurance or support for dependents) are covered.
2. What is your investment objective?
   Are you saving for a specific purpose, such as funding a child’s education, where you know how much you need and when? Or are you investing to generate income, where maintaining a reliable cash flow is more important? Your goals will influence the type of investments suitable for you.
3. What is your timeframe?
   Investments are generally medium- to long-term commitments (five years or more). If you may need access to the money in the short term, investing may not be suitable. Early withdrawals can mean penalties, losses, or selling in poor market conditions.
4. What level of risk are you willing to accept?
   How comfortable are you with short-term declines in value? Do you want your capital to be partly protected, or are you willing to take higher risks in exchange for the chance of greater growth?
5. What is your level of knowledge and understanding?
   Some investments are complex. Make sure you fully understand how an investment works, its key features, charges, and risks. You may prefer to select investments yourself, or you may benefit from the guidance of a professional financial advisor.

Seeking Professional Advice

There are many qualified financial advisors available to help. If you choose to seek advice, ensure your advisor is acting in your best interests, has the necessary expertise, and explains recommendations clearly so you feel confident in your decisions.

Avoiding Investment Scams

Unfortunately, cases of fraudulent advisors and investment scams are regularly reported in the news. To protect yourself, it is important to stay alert and watch out for warning signs such as:

• Unsolicited offers – Be cautious if you receive unexpected calls or messages promoting “incredible” investment opportunities. If it sounds too good to be true, it usually is.
• High-pressure tactics – Do not allow yourself to be rushed into a decision by claims of a “limited time offer” or a “once-in-a-lifetime opportunity.” A legitimate investment will still be there tomorrow, and you should feel free to walk away if you are not comfortable.
• Lack of clarity – Avoid investments that are overly complex or have unclear fees and charges. Ask your advisor to explain everything in plain language. If they cannot, the product may not be right for you.
• Unusual payment requests – Be wary of any request to transfer money directly to an individual, or to pay through email or phone instructions. Always verify the legitimacy of a company or advisor before making any payment.

• Verify authorisation – Always check the AFSA Public Register to confirm a firm’s status. Review prospectuses and official disclosures carefully. You may also consult IOSCO’s I-SCAN tool as an additional reference but remember: absence from the I-SCAN list does not necessarily mean a company is legitimate.
• Check payment and documentation – Before transferring any funds, confirm that payment details and legal documents are accurate and consistent with the authorised entity.
• Build your knowledge – Strengthen your understanding of financial basics, including regulation, risk, and diversification. Informed investors are better protected.
• Seek independent advice – Consider consulting licensed, independent professionals who can provide impartial guidance tailored to your situation.