Photo credit: Financial Markets Authority
New Zealand’s Financial Markets Authority (FMA) – is urging do-it-yourself online investors to pause before succumbing to investment FOMO as part of World Investor Week that starts today (4 October).
Recent research by the FMA into online investing platforms found 31% of all online DIY investors jumped into an investment in the last two years because they didn’t want to miss out.
Additionally, 27% said they invested based on a recommendation from someone they know without doing their own research.
Given this state of affairs, the FMA’s public campaign is urging investors to follow the ‘5 D’s of DIY investing’. These are: Do your due diligence; Drip feed your investments; Diversify your portfolio; Don’t freak out if markets go down; and If in Doubt, talk to a financial adviser.
One particular DIY investor type the authority is focused on is the ‘planter investor’ identified in the research. Planters make up (42%) of DIY investors, with the others being opportunists (19%), speculators (20%) and dabblers (19%).
Gillian Boyes, FMA Investor Capability Manager, said planters tend to be comparatively younger with a female skew, and to 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,” she explained.
“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.
Boyes said the authority wanted to use World Investor Week to remind New Zealand’s DIY investors about good investing habits and steps they can take to protect themselves.
“As part of their due diligence, we’re encouraging planters to ask themselves some important questions before making an investment. These include: Will the investment earn an income? Do I understand the company I’m thinking of investing in? Is the share price reasonable? What fees or costs are involved? How can I get my money back? Is it a legitimate offer?”
World Investor Week is an annual event sponsored by the International Organization of Securities Commissions.