Tips for using online investment platforms

Online trading
Financial intermediaries

Tips for using online investment platforms

Online platforms are convenient and fast, but that does not reduce the importance of doing your homework when making investment decisions:

1. Understanding the features and risks of the products

When investing online, the lack of interaction with a sales intermediary or financial advisor (who may provide explanations or clarifications) could mean that investors may not be able to fully understand the nature and risks of the products. You should not buy any products that you do not understand. If in doubt, you are advised to seek help from the platform operator and raise questions to ensure that you understand the product thoroughly before investing.

2. Be careful of high risk products

Online platforms may carry products of varying risk levels. You need to be careful of high risk products. You should exercise due caution to assess and select products that suit your investment objectives and risk tolerance level.

3. Be responsible for your own investment decisions

For products that are simple and easy to understand, investors can reasonably be expected to understand their features and risks. For this type of products, online platform operators may not be required to perform suitability assessments when clients make their purchases in a self-directed manner (i.e. without any solicitation or recommendation by the platform). Given that certain simple products (such as simple high yield bonds) may be risky, investors should not overlook or underestimate the risks of investing in them and should take responsibility for their own investment decisions.

4. Provide accurate and sufficient information

When using the services of online platforms (including robo-advisory services), investors should provide accurate and sufficient information in order to enable the platform to provide in return, where applicable, appropriate investment advice that is suitable for the client in terms of investment goals and/or risk profile etc.

5. Read the information thoroughly

Investors should be aware of, and should read, the information available on online platforms, e.g.

  • product offering documents and warning statements,
  • methodology adopted by platform operators for assessing and assigning ratings to investment products and categorising clients (if any),
  • scope and limitations of services and investment products provided,
  • fees and charges, and
  • remunerations earned by the platform operator, e.g. being paid by investors or by other persons (such as product issuers).

6. Don’t rely on and blindly trust information on social media/chat groups

Information, statistics and analysis etc shared on social media, chat groups and other social networking platforms may not be accurate and reliable (and may be biased, misleading or even malicious). Market manipulators may spread rumours and false claims on these platforms to manipulate share prices and potentially commit other crimes. Fraudsters may also make use of these platforms to promote fraudulent investment schemes.

7. Don’t follow the herd and trade on rumours

You should guard against the dangers of a herd mentality and should avoid trading on rumours (e.g. on highly volatile stocks) to avoid becoming victims of "pump and dump" schemes. Remember: if an investment sounds too good to be true, it probably is. You can check the SFC Public Register to make sure the platform operator has an appropriate license, and verify the investment scheme is authorized by the SFC before you invest.

8. Do your own research

Some online platforms or their connected social networking platforms may provide statistical tools or analytical services. As a rule of thumb, always do your own research and do not solely rely on third parties’ information/recommendations to make your investment decisions.


16 April 2018