• Investing your savings: what to do and what not to do
• 1.  Consider your needs and your preferences with regard to investments
• 2. Make inquiries about products and services
• 3. Check that the intermediary you are using is authorized and establish a positive relationship with them
• 4. If you do not understand, do not invest
• 5. Potential high returns go hand-in-hand with high risks
• 6. Mistrust improbable proposals
• 7. Do not sign any blank forms
• 8. Use envisaged and safe payment methods
• 9. Follow your investments over time
• 10.  Internet: lots of opportunities but a little more attention required

This does not intend to be a treatise on how to invest: in the end, it would be boring and therefore pointless. It simply intends to provide a number of simple and immediately applicable rules, to be ticked off one by one, before making an investment.

• Consider your needs and your preferences with regard to investments
• Make inquiries about products and services
• Check that the intermediary you are using is authorized and establish a positive relationship with them
• If you do not understand, do not invest
• Potential high returns go hand-in-hand with high risks
• Mistrust improbable proposals
• Do not sign any blank forms
• Use envisaged and safe payment methods
• Follow your investments over time
• Internet: lots of opportunities but a little more attention required

We are not all alike and neither are the events which concern us. Everybody has financial aims which derive from our investment needs and preferences.

A careful definition of the objectives permits us to establish when we will need the invested cash and the level of the expected returns, obviously in relation to the risk we are willing to undertake.

The timescale, the propensity towards risk and the return expectations therefore depend on these personal objectives. These elements define the investor’s financial profile.

The timescale is the period of time we intend to give our financial resources up for, in order to invest them.

It depends on subjective situations. For example, the needs may be short-term, such as the payment of taxes, or long-term, such as the purchase of a house in a few years time.

The timescale also depends on the age of the investor: for example, when investing for welfare purposes it is clear that a twenty-year old has a longer timescale than a sixty-year old.

If the timescale is short-term, it is as well that the investment is low risk and, therefore above all else tends to maintain the capital: the short-term timescale, in fact, would not permit us to recover any eventual losses.

By contrast, over the long-term it is possible – if our propensity towards risk allows it – to accept greater risks in order to achieve greater returns: the long-term timescale in fact makes it possible to offset any losses due to negative market performances.

The propensity towards risk represents the willingness to support asset losses due to the negative performance of the market: the more we are inclined towards risk, the more we are willing to accept that the investment does not achieve the results we expected.

Therefore, when choosing the investment, we must effectively determine our tolerance to risk, quantifying the percentage of the asset invested which we are willing to lose in a specific period of time if our earning prospects do not materialize.

The more we tolerate the risk, the more we can choose investments whose value may undergo sharp fluctuations, such as, for example, shares. If, by contrast, we suffer at the mere thought of seeing our assets decrease, then more tranquil investments are preferable, such as, for example, short-term Government securities (obviously issued by reliable Governments).

The return expectations, in conclusion, must be realistic: one cannot "expect the earth" and it is always necessary to consider that the returns of many investments depend on the performance of the financial markets, which may vary suddenly, interrupting prolonged positive periods.

And above all else, you must be aware that greater returns go hand-in-hand with greater risks.

In order to invest in financial products, especially if complex, it is as well to be informed. Information on financial matters is obtained as it is for any other matter: reading newspapers, publications, books, listening to radio and television programmes, speaking to individuals who have more experience than us and surfing the internet. The Consob website is also an abundant source of data and information.

Because, however, information is particularly important on this matter, it is envisaged that the investor be provided by way of obligation with documents such as, for example, the information prospectus or the same contracts to be signed.

It should be superfluous to emphasise the absolute importance of carefully reading this documentation. Unfortunately, however, sometimes it is only read afterwards, discovering too late that it was better not have purchased that product.

In Italy, intermediaries (banks, investment firms, etc.) must be authorized in accordance with the law, and this represents an important form of protection for the investors.

As a point of fact, the authorization is issued solely in the presence of the required requisites and the authorized intermediaries are constantly overseen.

If someone proposes a service or an investment activity   to us therefore, it is necessary to check that they are authorized.

Checking is not difficult: internet permits us to directly access the information held by the supervisory authorities; otherwise we can contact said authorities by means of traditional channels.

The authorization is issued by Consob or the Bank of Italy, in accordance with the matters envisaged by the Consolidated Law on Finance (Italian Legislative Decree No. 58 of 1998).

The intermediaries licensed to offer investment services or activities include:

• Asset management and investment firms (SIMs): they are Italian investment firms and can be authorized by Consob to offer all the investment services. The check can be made by consulting the register kept by Consob, published in the Intermediaries section of the website www.consob.it;
• Italian banks: they can be authorized by the Bank of Italy to offer all the investment services. The check can be made at the offices of the Bank of Italy;
• Italian asset management companies (SGR): they can be authorized by the Bank of Italy to carry out individual asset management activities, advisory activities and the marketing of mutual investment funds; the check can be made by consulting the register kept by the Bank of Italy, published on the website www.bancaditalia.it/vigilanza/albi and supervisory lists;
• financial intermediaries enrolled in the register envisaged by Article 107 of the Consolidated Banking Law kept by the Bank of Italy: they can be authorized to trade on own account and execute the orders of clients (solely in relation to financial derivatives), as well as carry out the subscription or placement service; the check can be made by consulting the list kept by the Bank of Italy, published on the website www.bancaditalia.it/vigilanza/albi and supervisory lists;
• banks in EU nations: they can offer the services which they are authorized to offer by the supervisory authority of the country they belong to; the check can be made at the offices of the Bank of Italy;
• investment firms in EU nations: they can offer the services which they are authorized to offer by the supervisory authority of the country they belong to; the check can be made by consulting the list held by Consob, published in the Intermediaries Section of the website www.consob.it;
• non-EU investment firms: they can be authorized by Consob to offer all the investment services; the check can be made by consulting the register held by Consob, published in the Intermediaries Section of the website www.consob.it;
• non-EU banks: they can be authorized by the Bank of Italy to offer all the investment services; the check can be made at the offices of the Bank of Italy;
• stockbrokers enrolled in the consolidated national register kept by the Ministry for the Economy and Finance: they can perform activities for the execution of orders, placement, individual portfolio management, reception and transmission of orders and advice; the check can be made on the website of the Ministry for the Economy and Finance (www.dgt.tesoro.it).

As a rule, the licensed parties operate out of their head offices or branches, where the investor goes to make the investments. Sometimes, however, the offer and the placement of investment services and financial products is carried out "door-to-door" and therefore also at the home of the investor.

The Italian legal system has deemed that in these cases the investor must be particularly protected, taking steps so that:

- the licensed parties avail themselves of financial advisors, enrolled – after they have passed an exam – in a registered held by Consob which can be consulted on the website, in the "Intermediaries" section, where the investor can check the effective enrolment of the advisor;

- the investor has 7 days from signing anything to exercise the faculty to change their mind (also referred to as withdrawal) and withdraw from the contract without any cost. This faculty only applies to the placement of financial instruments and the individual portfolio management service.

These rules also apply to investments subscribed at so-called "financial sales outlets". As a rule, these involve the offices of the financial advisors, structures where the latter base themselves so as to carry out their activities.

Once we have ascertained that the party we are dealing with is authorized, we must exploit the opportunity of being able to avail of a professionally-qualified party.

We have seen that in order to invest, it is necessary to be aware of several aspects: in the first instance, our needs and preferences and the features of the financial products which can satisfy them as fully as possible.

This "awareness" process can be faced autonomously or, better still, emerge from a profitable form of collaboration with the intermediary who provides the investment service (banks and investment firms).

In particular, an exchange of information must be established between the "seller" and "purchaser": the seller, as a rule, is obliged to request information regarding the financial profile of the client as well as provide, in turn, information on the investment. At the same time, the client will have to communicate their personal requirements to the intermediary before the service is provided.

Without doubt, a more adequate and in-depth definition of the investment objectives of the individual and, therefore, a more suitable investment choice, can emerge from the spirit of collaboration between the client and the intermediary.

If, in spite of reading the available documents and the information obtained, you do not understand the nature, characteristics and risks of an investment, it is better not to invest. Especially if the investment involves particularly complex products.

Many products featuring a complex structure exist on the market, often with fanciful names and with risk/return profiles which are difficult to comprehend. When they are proposed to us, we must ponder two questions:

- whomever offers a complex product is perfectly aware of the characteristics and the advantages and disadvantages;

- do we have the same knowledge and awareness, especially in the case of complex products?

At this point we must once again ask ourselves: granted that it is advantageous to whomever is offering (otherwise they would not be doing so), is it advantageous for us to purchase?

We can answer the question only if we manage to gain knowledge:

- of the nature of the characteristics of the product;

- of which conditions should occur and the related probability, in order to gain positive or negative effects from the investment;

- of the worst case scenario for us and of which consequences, in terms of lack of return or loss of capital, we will have to bear if it occurs.

If we fail to have fully clarified all of this, let’s refrain from investing: it is like playing a game of cards with someone who knows the rules and the value of the individual cards while we, by contrast, do not have the same knowledge.

A famous scholar once said that there is no such thing as a free meal in economics, Another famous economist expressed the concept that if every morning we can purchase warm bread, it is not due to the benevolence of the baker but because he wants to make a profit. We, who are not famous economists, can express ourselves in more direct terms: no-one gives anything for nothing.

It is an iron-clad rule, from which you cannot escape: the greater possibility of profit is paid by the greater risk to be borne, since the return can translate into a likewise significant loss in the event of the unfavourable performance of the reference market.

It has probably occurred, especially in the last few years, that we have gone to the bank, informed ourselves on the return on treasury bills (BOTs), turned up our nose and asked: is there not something with a better return?

A legitimate question, only right and proper for those who wish to invest their savings to best effect. However, we must be aware that any activity which is more profitable than a short-term Government security (obviously issued by a financially sound government) unfailingly involves additional risks.

Well then, before heading towards the more remunerative investment, we must understand what the additional quota of risks involves, what are the conditions (and the probability of them occurring) which could lead to negative consequences for us and the nature and the extent of these consequences.

Only if we are clear about this, can we correctly assess the most risky activities, and also decide to purchase, aware however of the greater risk we are facing, which is plainly and simply the price to be paid for the possibility of a greater return.

In conclusion, products which are objectively more risky than others exist. It is as well therefore:

- to consider with extreme care the purchase of unlisted securities on organized markets: it is difficult to check the market price for these securities and their sale may not be easy and could be penalizing. It is possible to check – at least for the Italian companies, whether the financial instruments which you intend to purchase are in the list of listed securities on the business pages of the main newspapers, as well as on the website www.borsaitaliana.it and on other specialized websites;

- always assess the purchase of derivative instruments  very carefully (futures, swaps, forward agreements, options), structured bonds and covered warrants;

- be very careful when assessing proposals which involve intermediaries, companies or securities from "exotic" countries or "tax havens".

The matters just illustrated are valid: no-one gives anything for nothing. We must mistrust investment proposals which guarantee a very high return which is not in line with market ones or "zero risk". The promise of high returns as a rule goes hand-in-hand with very high risks or, in some cases, even attempted swindles.

We should steer clear of "chain letters", in other words those proposals which promise returns linked to the subsequent joining or compliance of other parties, who often must be convinced by the same investor to comply. These "transactions" in fact, cannot guarantee any type of return, since they are usually fuelled exclusively by the continuity of those joining. In other words, when the new members are no longer enough to pay the "interest" to the previous subscribers, the ventures are destined to fail.

We should also mistrust vague and generic investment proposals, whose methods for investing the savings are not illustrated in detail (what type of securities will be purchased, at what price, on which markets, involving which risk profiles - interest rate, exchange rate or counterpart – and whether and which hedging instruments will be used against these risks).

We should not even need to mention this rule, it is so obvious. And yet, people often sign contracts and forms without having read them first or, even, without them having been filled in, delegating the intermediary to do so subsequently.

It is an extremely hazardous practice, which leaves the way clear for dishonest operators to commit abuses whose effects may not be very dissimilar to those which might occur if we hand over a blank cheque.

The equivalent value of the investment must be paid over using the payment methods envisaged by the contract alone.

In the event we are contacted by a financial advisor, then, you must never make payments in cash, or by means of cheques not made out in anyone’s name or made out to the advisor; by contrast, it is always necessary to use bank cheques or bankers’ drafts made out (or endorsed) in the name of the intermediary for whom the advisor works or the party whose services or products are offered; these cheques must also contain the clause "non-transferable".

It is also possible to use credit transfers or similar instruments, but also in this case never in favour of the financial advisor. Following these instructions, reduces the risk of unpleasant surprises .

Investing your savings does not end at the time of choice and purchase. Over time, the features of the chosen product may change (think of a bond whose issuer is no longer so sound) and our needs may change (for example, we have grown up, we want to raise a family instead of keeping all our savings liquid ready to be spent on fun and travel).

Also in this case, information plays a fundamental role: we must follow our investments and acquire as much information as possible. For such purposes, besides press information and that obtained via other means of mass media, we must carefully read the documentation which our intermediary usually sends us.

Okay: these are not documents which are particularly interesting. But they should be read, because they tell us about the health of our investment and can advise us on the opportuness of maintaining them or liquidating them.

As a result of the internet, the possibilities of contact between individuals have multiplied, and therefore so have those for publicizing, proposing and finalizing investments via websites or e-mail.

Arranging transactions from one’s own computer is convenient and quick, without therefore being particularly complicated. However, you need to use some caution so as to protect yourself from any unpleasant surprises.

First and foremost, the user code and the password and other data relating to our relationship must never be given to others, not even to those who we think deserve our utmost confidence: it would be like handing over a fully signed cheque book. Also be careful not to communicate the above information unwittingly, maybe by replying to e-mails which appear to come from our bank or answering telephone calls. The rule is that this information should not be communicated to anyone.

The fact that a transaction is concluded via internet does not exclude the intermediary from observing the rules it is obliged to respect. It will do so using different methods which, in the majority of cases, will involve screen and e-mail messages. Therefore, pay attention to any message that you may receive: each one of these corresponds to a prescribed obligation of the intermediary for our protection.

Internet has multiplied the possibility of illegal initiatives. If we receive a proposal via e-mail, or if we wish to comply with an offer on a website, it is best to make a few more checks:

• check that the party proposing the investment is clearly identifiable;
• check that the contact details provided (telephone, fax number and headquarters of the party) effectively correspond to those of the party, maybe by availing yourself of the "telephone subscribers list" service;
• always directly check with the supervisory authority that the party is licensed. The existence on a website of reference to the circumstance that the party is supervised by a public authority or of links to websites of controlling authorities does not involve any undertaking of responsibility by these authorities nor does it ensure the content of the proposals made;
• download, print out and carefully read the documentation contained on the website and keep it.