Page last updated: 15 March 2021

Understanding the risks

Investing is about growing your money over time.  It can be fun and rewarding but there are also risks.

Many platforms offer social media forums for members to learn from each other and ask questions. But be wary. Social media chatter is no substitute for expert advice.  Don’t take tips from people on the internet and be cautious about relying on opinions from others.  If in doubt, get some financial advice. Or at the very least, do your own research.



High-risk investments

High-risk investments like cryptocurrency and derivatives, like options trading, are typically not suitable investments for the average investor and should be approached with caution. For more information:

Types of investments

Borrowing money to buy shares or other investments is extremely risky.  It’s like borrowing money to place a bet. If your investments lose value, you will still need to pay the full amount borrowed. 

Check to see if the online platform you are using is registered in New Zealand. Investing via a legitimate New Zealand based platform may offer more protections than those that are offshore. Go to the Financial Services Prodivers Register website.

In New Zealand, when you invest via a legitimate New Zealand-based online platform your money does not go to the trading platform but rather via the platform to its custodian. Should the platform fall into difficulties, your money is kept separate from the platform’s own money. Custodians have a number of reporting obligations including submitting annual custody assurance reports to the FMA.

Custodians and investments

Custodians do not guarantee your investments if the companies you invested in get into financial difficulty.  This means if you have invested in company A and they go into liquidation you will lose the money you have invested. This has nothing to do with the custodian.  

Investing is about growing your money over time.  Some people engage in day trading, which is when you buy and sell shares quickly, usually within the same day to try and realise a short term profit.  Research shows that actively trading shares in this way results in more losses than investing and holding.  Day trading is very risky and you are far more likely to lose money than to make money.

If you are trading regularly you may be classified as a ‘trader’ according to New Zealand tax law and you may have additional tax responsibilities. Consult a tax practitioner if you are unsure.

  • Be on the lookout for imposter sites, and always be careful when investing via a link.
  • Always read the terms and conditions.
  • If the platform is offering New Zealand based shares check if they are an accredited participant on the NZX (look for NZX logo on the landing page and check on the NZX page)
  • Spend time reading about what is being said about the platform. Don’t rely on social media chatter but look at a wide variety of sources.

Scams targeting investors are increasing in sophistication so always be on the lookout. For more information see the scams section.

All investors, whether new or experienced, have to stick to certain rules – and one is not trying to ‘tweak’ the market in your favour.  Market manipulation, for example, with fake rumours or false orders, is unlawful regardless of whether you succeed.  

Market manipulation is where someone misleads (or attempts to mislead) the market by actions or omissions that give a false appearance of trading activity, supply, demand or the value of financial products.  It involves financial products that are traded on a licensed market such as NZX or ASX, in particular shares, bonds and derivatives. 

See our Market Manipulation page for more details. 

Is online investing right for you? 

If you decide that you want to invest via an online platform then here are some things to think about.


Choosing an online investing platform