If you’re considering investing in something everyone is talking about, do some checks first. If it sounds too good to be true, it probably is.
Watch out for investment hype
Investment hype is where something is widely promoted and creates a lot of buzz. You may hear about it on social media, in the news, or in online forums. Often the messages of high earnings are repeated.
Investment hype is created through:
- Fear of missing out – peer pressure to be part of ‘the next big thing’, or triggering regret if you don’t invest
- Trust – an investment is promoted by someone you listen to, like a social influencer or media personality
- Timing – pressure to invest now or ‘you’ll miss out’, creating a sense of urgency
When you’re in the thick of it, hype-driven investments can be hard to recognise. They often end badly so it’s important to be cautious.
How to avoid investment hype
Sometimes it’s hard to avoid rushing in. There are things you can do to slow down and make an informed decision.
Understand what you’re investing in
If you don't understand how an investment makes money, or you can't explain it clearly to someone else, do more research before you invest.
Read offer documents, like the product disclosure statement (PDS). This tells you an investment's key features, returns, fees, and risks.
Or you can check ASIC's Offer Noticeboard database for disclosure documents. If there are no offer documents, this is a red flag.
Don’t rely on celebrities for investment information
Celebrity or influencer endorsements are often motivated by payments or other benefits they receive. Do your own research on the investment to make the best decision for your circumstances.
Watch out for ‘get rich quick’ schemes and scams
Fake experts can often promote investments in front of flashy cars or properties. Sometimes they claim to be able to ‘double your money’ quickly. High returns usually mean there’s a higher risk of losing your money.
Beware of surprise offers to invest in something that’s being talked about a lot. Scammers use the hype around ‘hot investment topics’ as an opportunity to trick people out of their money.
Check for signs of an investment scam.
Check a company is licensed
Check that a company or product issuer is licensed by ASIC to advise on or offer an investment. Search ASIC Connect's Professional Registers for details of their Australian financial services (AFS) licence.
If they're not there, or the details don’t match, don't invest.
Consider your investment goals
Take the time to consider if an investment aligns with your goals. Planning is the key to successful investing, so it’s important not to rush decisions. See how to invest to develop an investment plan.
Get professional advice if you're unsure
If you're unsure about an investment, seek financial advice.
Check investment warnings
Keep informed about financial services scams through the Australian Securities and Investments Commission (ASIC) scam alerts.
Read the articles below about some well-known, high-risk investments. This includes cryptocurrencies and foreign exchange (FX) trading.