What’s New?: News Releases 1999 | Securities Commission


	Advanced Search

Print this page.

01 October 1999

News Release

WHAT MAKES PEOPLE DECIDE TO INVEST?

Media Release

A paper on investor behaviour has been released by the Securities Commission. It identifies three general concepts in explaining investor behaviour. These are:

the expected returns of an investment,
the risk preferences of the investor, and
the personal confidence of the investor.

These concepts provide a base from which general advice can be offered to investors. For example:

Be realistic about the returns you expect from an investment -
The expected returns of an investment can be uncertain. It is important to research an investment's potential and read the investment statement accompanying the offer.

Be comfortable with the risk level of an investment -
Investors have various risk preferences. Some investors have an overwhelming fear of risks, while others love to take a risky gamble. Neither extreme is beneficial in the long run.

Understand that you can be influenced by the actions of others and by your own pride -
Investors have varying abilities and confidence. Those who lack confidence may choose to seek professional advice. If so, they should seek a reputable investment adviser. Investors who choose to exercise their own judgement should be careful not to respond to misleading signals.

"The paper is a useful base for our work in encouraging people to make sensible investment decisions," Chief Executive John Farrell said.

Too many are being lured into dubious schemes, which are not adequately documented, by personal contacts, so-called friends, or telephone callers from overseas.

Investors should be particularly wary of schemes which:

promise unusually high returns,
demand that details must be kept secret,
give little or no information about the issuer,
claim the investment is "safe" or "risk free",
claim to be "private" offers open only to a select few, or
claim returns come from "prime banks" or "top world banks" or the like.

"Think carefully before investing, and check with reputable financial advisers," John Farrell said. "Do not assume that people who approach you with apparently attractive offers are doing you a favour."

The paper Considerations in Explaining Investor Behaviour prepared by staff economist, Michael Wydeveld is available at: www.seccom.govt.nz

1 October 1999

John Farrell
Chief Executive

Ph: 04 472 9830

Return to index