Investing requires balancing rewards and risk. Whether you are investing hundreds or thousands of dollars, a smart investor understands that to gain potential rewards, he or she must be prepared for potential risks. You are responsible for deciding how much risk you want to take and finding ways to mitigate against such investment risks.
You can manage these risks by diversifying your investment portfolio. Instead of putting all your money into one type of investment, spread your money across different platforms. Diversification is not a guarantee that you will not lose money on your investment, but it does enable you to reduce your risk of losses while possibly increasing your return potential across a portfolio of investments.
There is no such thing as a risk-free investment
As a general rule, if you take limited risk, you will see limited returns. Therefore, there must be a balance between risks and rewards
Having a diversified investment portfolio helps reduce the risk of losing all your money
Keep informed about your investments and ask questions
Conduct research before investing to protect against financial scams
The COVID-19 pandemic stopped the entire world and was an entirely new learning experience for many of us. While lessons may vary, one thing remains true - it reminded us to always be prepared for life’s unexpected challenges.
An emergency fund is a stash of money put aside to cover unexpected financial surprises such as job loss, medical emergencies, car troubles, or natural disasters. Aside from financial stability, pros of having an adequate emergency fund includes helping keep your stress level down, keeps you from spending on a whim and keeps you from making bad financial decisions. Here are some tips to help you get started on an emergency fund:
When deciding where to invest, always take into account your risk tolerance, purchasing power and the real rate of return. Purchasing power measures how much a unit of currency can buy. It can be affected by policy changes, major events, industry changes, and inflation. Inflation is the rise in the prices of goods or services and subsequent decline of purchasing power over time.
The real rate of return is the annual percentage of profit earned on an investment adjusted for inflation. The real rate of return accurately indicates actual purchasing power and is calculated by subtracting the inflation rate from the nominal interest rate.
One of the first steps in choosing an investment is to check whether an entity is registered or licensed by the Cayman Islands Monetary Authority (CIMA). If an entity is registered or licensed by CIMA, that means it has met its basic regulatory obligations. To verify if an entity is registered or licensed by CIMA, see Investment Funds statistics or Securities statistics.
CIMA also maintains a list of mutual funds that have been removed from the register. The list of these terminated entities is only up until the date shown and can be viewed here.
Please note that an entity being registered or licensed should not be taken as an endorsement by CIMA that you will not lose your investment.
Any suspicious or fraudulent activity should be reported immediately to the Financial Crime Investigation Unit. This specialized unit is dedicated to investigating criminal offences related to money laundering, the financing of terrorism and fraud. Suspicious activity for financial crimes can be both hard and easy to spot.
Consider these examples of potential signs:
Anyone who believes they may be a target or victim of a financial scam is encouraged to contact the Royal Cayman Islands Police Service’s Financial Crimes Unit on RCIPS.FCU@rcips.ky or +1 345 949-8797.
Environmental, social and corporate governance (ESG) investing, socially responsible investing and impact investing are terms that fall under sustainable finance but can sometimes overlap and may involve different approaches to investments.
Socially responsible investing involves considering the social impact, specific ethical criteria or moral values of an investment as well as the expected financial return. Although this method may consider ESG factors, it goes a step further by seeking out or eliminating investments based solely on a specific ethical consideration.
Impact investments aim to help an organisation or business generate a positive and measurable social or environmental impact in addition receiving a financial return. This type of investing provides capital to address challenges in sustainability.
ESG investing focuses on companies making an active effort to either limit their negative societal impact and/or deliver benefits to society. It is an increasing trend to use ESG factors to steer investment decisions. Key ESG factors fall under these categories:
You can read more about ESG and sustainable investing here.
Like all investments, it is important that you understand what you are investing in. Be mindful that ESG criteria for one investment may differ from another’s. You can find more information about how an investment incorporates ESG and how it weighs ESG factors in its disclosure documents. You should read all disclosures carefully to make sure you understand the investment and how its ESG orientation may affect its risk. Potential ESG factors to consider include:
Conservation of the natural world
Conservation of people and relationships
Standards for running a company
Climate change and carbon emissions
Air and water pollution
Data protection and privacy
Audit committee structure
Gender and diversity
Bribery and corruption
It is always important to understand whether an investment’s stated environmental, social and governance (ESG) approach matches your investment goals, objectives, risk tolerance, and preferences. So be sure to choose an approach that is right for you. Here are some things to consider:
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