Investor Rules

Investor Rules, what to do and what to avoid

Even the most sound legislation cannot fully prevent fraudulent practices. The Czech National Bank (CNB) is aiming to create the best conditions for clean, honest and competent behavior for companies which fall under its supervision. The bank's commission thoroughly checks the licenses of all investment companies and brokers doing business in the Czech Republic.
For the investor, there's no substitute for prudence and being well informed!

The following represents a few basic rules the investor should always keep in mind:

1. Do not deal with companies who do not have the appropriate license. Such companies do not fall under CNB supervision and, moreover, are acting illegally. If you have any doubts, please contact the CNB.
2. Do not buy information offered through unsolicited mail or by telemarketers. Also, do not let stock traders talk you into buying stocks. Before making a final decision, get all information in writing and make sure you understand it. If you have any fears or uncertainties, ask an expert.
3. Do not invest in instruments you do not understand. Seek expert advice. Seek information from all available sources (professional books, daily papers, journals, Internet). Also consider seemingly unimportant or superfluous details.
4. Do not expect that the money you invest will automatically make a return for you. Thoroughly examine all investments that offer set yields. Make sure you understand what they offer and under what conditions.
5. Do not trust tempting offers of quick profits or unusually rapid or high returns. High returns usually mean high risk! When the offer is too good to be true, it usually is. Do not forget that impressive past investment returns do not guarantee the same returns in the future.
6. Consider your degree of risk aversion. Various investments bring various degrees of risk. Would you mind if the value of your investments decreased for some time?
7. Realize what your goals are. Do you want to keep pace with inflation or achieve maximum appreciation of your money? Also consider the length of time you can afford to have your money invested. Are you willing to have that money unavailable to you? (Investments are usually middle- to long-term affairs.)
8. Evaluate the fee structure. Is it reasonable? Is it commensurate with other firms?
9. Assume that the person giving you advice might be biased. Ask whether he works for the company or is otherwise connected to it (even though that might mean only recommending the employer's products).
10. Make notes from all discussions and meetings you have with the company. Carefully keep copies of all correspondence and documents.