Three steps to take before downloading a mobile investment app

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Investing today has never been more accessible. With the advent of electronic trading platforms in 1992, the proliferation of internet accessibility in the mid-to-late 90s and the growing adoption of mobile devices in the early 2000s, investors now have access to a variety of easy-to-use mobile investment apps.

While these technological advancements have made investing more accessible, investors need to remember to conduct thorough research on any investment app they plan to use. Specifically, investors should consider their fee expectations, service needs and most importantly, if the app is credible and registered. Below are three steps to assess if an investment app is legitimate and suitable for you.

 

1. Registration is essential, even for investment apps

Not all apps offered through the app marketplace on our mobile devices are credible and such apps can expose you to the risk of fraud. It is important to always to check the registration of any investment advisor, firm or platform to ensure they are working in compliance with regulatory requirements. Securities professionals and firms dealing in securities are required to register with securities regulators, and this requirement extends to the investment apps they offer. Checking registration enables investors to validate that the investment app they plan to use is qualified and permitted to sell securities. Ignoring or skipping this step and using an investment app offered by an unregistered firm may not provide you with any of the typical investor protections that may exist with a registered one.

For those interested in investing in crypto-assets, check the registration of any crypto investment app that will hold custody of your funds or crypto-assets. Not all crypto-assets are deemed securities, but if an investment app holds your financial assets, it’s strongly recommended you only use one that is registered. To verify the registration of an investment app, visit CheckFirst.ca/check-registration brought to you by the Alberta Securities Commission.

 

2. Avoid the telltale signs of fraudulent or suspicious investment apps

Unfortunately, the ease and widespread appeal of mobile banking and investment apps is not lost on fraudsters looking to capitalize on eager investors. Fraudsters often create investment apps that imitate legitimate financial institutions and registered investment firms and promote them through online advertising or one-on-one interactions with targets. You can visit the CheckFirst Spotthespoof.ca website to learn more about these imitation websites and platforms.  Fraudsters also leverage the considerable market interest in crypto-assets to position their fraudulent investment apps as an easy way to invest in digital coins and crypto projects.

Remember these tips to avoid fraudulent investment apps:

  • Avoid unsolicited offers to download an investment app from those you meet online, like self-promoted experts, new acquaintances or love interests.
  • Check that the investment app you plan to download and use is the correct one offered by a registered financial institution or firm.
  • Be wary of investment apps with limited or broken functionality, spelling mistakes and odd in-app requests like wire transfers.
  • Conduct research online to see what others say about the investment app and if any red flags of fraud are found. Visit Checkfirst.ca/red-flags to learn what to look for.

 

3. Understand if the investment app is right for you.

Once you have conducted these steps, it’s important to review the fees and charges of your chosen investment app. Investment apps and platforms offered by financial institutions and firms do not have the same costs or services. Often the fees associated with trading, currency conversions and account maintenance will vary between them. Review the fee structures and the services offered and choose one that best fits your investing style, needs and expectations.

Investment apps have ushered in a new era of convenience for investors but you should still take your time to review which option is the best for you. Before you hit the download button, remember these steps to help you find a suitable and registered app for you.

Diversification: A strategy to reduce your investment risk

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Investing has become more popular than ever, with news outlets, online forums, and maybe even your friends and family discussing the next big stock, sector or industry to invest in. Investing entirely in one thing can be tempting when all you hear about are high returns, but it also means the value of your entire portfolio can drop based on the movement of one stock or sector. Learn more below about how diversifying your investment portfolio can help you manage risks that could impact your returns.

Investing in the stock market always carries two inherent risks that comprise your total risk. The first, called systematic risk, is derived from broad market factors that impact the entire market and are something investors can’t control. These include interest rate changes, inflation increases, war, recessions, and even a pandemic like the world is currently facing. The second, called unsystematic or residual risk, is the risk inherent to the investment in a particular company, industry or market. This can include a new competitor in a company’s space or changing laws or regulations on an entire industry that impacts all the businesses within it. While investors cannot entirely remove unsystematic risk, they can take steps to reduce it and lower the total risk of their investment portfolio.

How do I diversify my investment portfolio?

Diversification is the act of spreading risk across your investments so that when some investments or sectors in your portfolio are performing poorly, you’ll have others performing well. Investors should look at their entire investment portfolio and evaluate the weighting of their investments across companies, industries, sectors and markets. Are most of your investments located in one country? You may want to explore investing in global stocks. Are you invested in too many technology companies? Consider broadening out into other sectors like financial services, energy or consumer staples. By creating what’s called a balanced portfolio, you can minimize the substantial losses you might experience if you were heavily invested in any one stock or market. If you’re having difficulty building a balanced portfolio, you may want to work with a registered financial planner or registered financial advisor to create a portfolio right for you.

Why diversify my investments if they are doing well?

It may be difficult to justify diversifying your investments if they are doing well, but remember that no security or market will altogether avoid downturns. Regardless of the investment, company, industry or market you choose to invest in, there are various unsystematic risks. These include business risk, financial risk, strategic risk and legal and regulatory risk. Each of these can impact your returns. Without diversification of your investments in different markets, industries and companies, your investment returns could feel the full effects of all this risk.

You can’t predict the future, but you can hedge against risk.

Even when you thoroughly research your investments, you still can’t foresee all the risks you may encounter. Diversifying your investment portfolio won’t protect you entirely from losses, however, it can help drive steadier returns in the long run and help you achieve your investment goals.