Investment and securities for beginners
Aptitude test, risk profile and the products you encounter as an advisor.
Many customers and guests place value on an event being held responsibly. Visible effort — such as clearly marked waste stations or a reused stage — is both good practice and good storytelling.
§Basic product types
- 01Stocks — an ownership stake in a company where returns depend on the company's development
- 02Bonds—a loan to a state or company, typically with lower risk and lower expected return than stocks
- 03Mutual funds and ETFs – a collective portfolio of securities that gives the customer diversification without having to choose individual stocks
- 04Structured products — more complex products composed of several elements, which require extra thorough explanation
§MiFID II and investor protection
Investment advice is regulated by MiFID II rules, which the Financial Supervisory Authority oversees. The purpose is to protect investors – especially private customers – from receiving advice or products that don't suit them. The rules require you to investigate the customer's circumstances before advising and how you document your recommendation.
§The suitability test.
If you provide investment advice or portfolio management you must conduct a suitability test of the customer. You must uncover the customer's knowledge of and experience with the products the advice concerns the customer's financial situation and what the customer wants to achieve with the investment. Under MiFID II you must also uncover the customer's ability to bear losses and risk appetite and you must prepare a written suitability report that summarizes the advice and explains why it fits the customer.
§Risk profile and spread
Part of the advice is about matching the product's risk with the customer's risk profile — how much the customer can afford to lose and how long the money should be invested. Spreading across multiple types of securities, sectors and geographies is a fundamental principle because it reduces the risk of one bad choice upending the entire savings.
| Risk level | Typical example | Typically suits |
|---|---|---|
| Lav | Government bonds, short bond funds | Short time horizon low risk appetite |
| Medium | Broadly composed investment funds | Medium-term horizon, mixed risk appetite |
| High | Individual stocks, niche funds | Long horizon, high risk tolerance |
§Your role
Your primary duty is honesty: explain costs, risks and commitment terms in language your customer understands, and never let your own sales targets override the customer's interest. Always document your basis, so a colleague — or a complaints body — can follow why you advised as you did.