There are so many new investment options these days like crypto’s and ETFs among the most popular and a whole new breed of investor millennials joining the fray and trying to circumnavigate the banks. We are all very jealous of their success. This is all going on amid a controversial discussion being run through media outlets about investors gaining access to appropriate financial advice balancing out the quality and cost with equitable availability. It seems the latter has fallen by the wayside thus the popularity of new investments themes, investors and available apps which are proliferating at a fast rate. The Haynes commission and previous compliance controls seem to have had the adverse effect of added strangulation of providing good advice at a fair price with deserting advisors buried in compliance and cost. With all this regulation investors are piling into all sorts of investments with perhaps not the knowledge of risk that they should have – because they can’t get access to it, it’s too expensive.

But then whatever happened to Buyer Beware. Be smart, be inquisitive and take responsibility for your actions as the buck should stop with the investor making their own educated decisions and not relying on anybody others apart from guidance. Whether you’re trading stocks, ETF’s, Bitcoin or some other tradable entity we all need an understanding of risk and how to manage it. Advice is advice, not a guarantee, nor should we expect it to be, (if we understand markets properly) or regulate to seem as such. If you don’t like it (or understand it), don’t buy it. Trust and hope don’t necessarily go hand in hand. All investors should have a common-sense knowledge of basic risk control and exposure. Cryptos sound great but with an exposure level of say around 2% you can partake without ‘risking the house’. At 20, 30, 40 or 50% well, you’re not so safe. Many of the recently launched ETFs are taking full advantage of new waves of technology and development. Remember you are buying future expectations amid a wave of bullish sentiment, and they may take some time to generate real returns as this is based on developing themes and many of these industries are young and developing. They will come back to earth with thud especially if there is a general market correction. Keep your exposure within your risk tolerance and remember markets go down as well as up.

And this is as it should be, the simple rules will keep you safe. It’s not that hard unless you get carried away with fads or fear of missing out (FOMO) or think you can double your money overnight and then think you can keep it. It’s a merry-go-round of psychological challenges and new investors need to be prepared for this and this is where a good knowledge of risk management will protect you and your capital. And we all know where all this leads us as history tells us. The mind can be a force of disaster or a force of common sense. In the end that is your choice. We are entering an exciting but dangerous phase of speculation and new financial alternatives, just keep your cool and make the right decisions for you.

AFR 22/11/21

Balance is key and exposure must be relative to risk. There is something to be said for good old-fashioned stocks that are based on real numbers with slightly less volatility. It’s called safety and that’s a number 1 rule when it comes to for risk management. There’s a sensible balance to be found that matches your risk tolerance or in other words, ‘available capital’ tolerance.