There are thousands of different financial products you could pick at any one time. Every other day, new variations of financial products are released into the retail market. Gustavo Dolfino, the American Investment Banker known for his no holes barred attitude, remains a pioneer in the world of securitized credit products. Gustavo is a global market professional and was CEO of multiple companies, including, but not limited to, WhiteRock Capital Inc., myKlovr, and Cancer Frontiers Inc. Gustavo held prominent leadership positions at many Wall Street firms, and worked his way to the top, literally graduating business school with less than $100 in his bank account.
Below are some simple tips from one of the industry’s greats, about how to invest your money wisely. Before deciding to put your money in a financial product, you need to keep in mind that “an investor needs to do very few things well, if he avoids the big traps, most people are tempted by” – “you do not have to do extraordinary things to get extraordinary results, said American guru, Warren Buffett.
Do not invest in what you do not understand. It is one of the recommendations that Gustavo gives to all investors. Today, the average person has before him a wide range of products he can pick from – stocks, investment funds, derivatives, fixed income, etc. “Choose wisely. Get a good advisor. Do not take on unnecessary risks; don’t be tempted by outlandish promised potential returns, as they involve an amount of risk, you are likely not to be able to afford,” said Dolfino.
Therefore, it is important to understand both the characteristics of the product (expected return, risk, time horizon, liquidity) and the market in which it is traded. If it’s the stock market, you should never invest in a company without understanding the numbers in depth, according to Fidelity guru and fund manager, Peter Lynch. “The biggest losses in stocks come from companies with a weak balance sheet,” says the expert.
Know your investment profile. Once you understand the product you are interested in, you should make sure that it fits with your objectives and risk tolerance. As a general rule, if a person is not willing or able to lose a lot of money and prefers to take little risk, the investment approach should be conservative, such as AAA corporate bonds, US Treasuries, Municipal Bonds, Blue Chip Stocks, Real Estate, etc. Remember, the higher the expected return, the greater the risk assumed.
Compare all available public information. The investor should know that he has at his disposal many resources to dig into the potential investment, ranging from analyst recommendations to 10K’s and 10Q’s, Sec filings, and so on. Gustavo was quoted as saying, “annual reports constitute only one data point in the graph; you should always put the information into context; one good year does not make a company”. “If your patient shows up to the ER with a broken arm and a blocked airway, and you focus on fixing his arm, you will likely have a dead patient, with a healed arm, he added.”