The British Columbia Securities Commission (BCSC) is urging investors to exercise caution when buying or selling stocks experiencing extreme price volatility.
The Canadian Securities Administrators (CSA), of which the BCSC is a member, and the Investment Industry Regulatory Organization of Canada (IIROC) are closely monitoring how extreme price movement of certain stocks may be contributing to volatility in Canada’s capital markets.
“If you’re feeling pressured to invest based on news stories or sudden market shifts, it may result in you buying high and selling low,” said Pamela McDonald, the BCSC’s Director of Communications and Education. “It’s easy to get caught up in the hype, but the best thing to do is to leave your emotions behind and get educated.”
As part of its mandate as a provincial regulator, the BCSC provides trustworthy and unbiased information to help investors get educated through InvestRight.org.
Do’s and Don’ts when it comes to investing during stock price volatility
1. Don’t Make Decisions Based on Emotions
When the share price of a company makes a sudden move, it may be tempting to try to capitalize for fear of losing out. However, there are serious risks associated with buying or selling stocks that are experiencing dramatic price volatility, including the risk of losing the entire investment.
2. Instead, Do Understand Risk Tolerance
Each individual’s financial situation is different, as is their risk tolerance, which is a willingness to accept a level of risk in order to achieve a given return. Investors can take a quiz on InvestRight to help determine how much risk they are comfortable with.
3. Don’t Get Advice From Online Forums or Social Media
Online forums, social media sites, and chat rooms can contain inaccurate information about companies, illegal promotional content, or advice that is inappropriate for certain investors.
4. Instead, Do Research or Use a Registered Financial Advisor
Investors should ensure they understand any company they invest in, regardless of whether it’s a part of a current market trend. Information about Canadian public companies is available on SEDAR. They should also check the registration of any person or business trying to give them investment advice using the CSA’s AreTheyRegistered.ca or IIROC’s database of advisors working for IIROC regulated firms.
If an investor needs help with their investment decisions, they should seek out a registered investment advisor. Unless investors are making their own investment choices using what is commonly called a “discount broker”, registered investment advisors are legally required to recommend only investments that are appropriate for an investor’s goals, financial situation, and risk tolerance.
For investor inquiries, please refer to your respective securities regulator. You can contact them here .