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Tips for Protecting Your Investments

AdobeStock_78797750-300x199It’s your money.  You worked hard to earn it. It’s taken years to save it. Now you need to protect it. Here are some tips to help you make more informed investment choices and protect yourself from investment scams.

  1. Check out the “salesperson.” Just because someone says they have a securities license doesn’t mean it’s true. We recently had a potential client call with a complaint about his “stockbroker” who we quickly discovered hasn’t been licensed since the 1990’s. Checking out purported stockbrokers is easy and free at FINRA’s BrokerCheck site. In addition to information about the securities licenses the individual has, it will show you his or her employment history, if he or she has ever filed for bankruptcy, and any customer complaints or charges by securities regulators.
  1. Don’t believe promises of little or no risk with high returns. The higher the returns, the riskier the investment. Period. 
  1. Don’t believe everything you read on social media. Fraudsters view social media as just another way to obtain victims. Investigate any potential investment with the SEC and/or FINRA before you invest. 
  1. Consider the total cost when comparing investments. Even seemingly small fees can have a significant impact on earnings over time. Don’t forget about surrender charges, commissions, early withdrawal penalties, and management fees.  The more an investment costs, the better it has to perform in order to provide the same returns as a lower-cost product. 
  1. Be alert to affinity fraud. An affinity fraud is one that targets members of an identifiable group such as members of a religious community, immigrants from a particular country, military members, or members of a fraternal organization. Just because someone purportedly belongs to the same group as you, don’t believe they are licensed or legitimate.  Check them out. See tip number 1 above. 
  1. All securities investments must be registered with the SEC or be exempt from registration. Check out potential investments using the SEC’s Edgar database or by calling the SEC’s investor assistance line (800) 732-0330. 
  1. Diversify. Diversify. Diversify. Investing in a mix of products (stocks, bonds, cash) in different size companies (e.g. large cap, small cap) and in different economic sectors (technology, utilities, manufacturing, energy, etc.) can help reduce the overall risk of an investment portfolio. If you chose to diversify by investing in mutual funds, make sure the underlying investments are diversified. If all the mutual funds you own are invested in the same economic sector, that won’t help you to diversify.

Doing a little homework before you invest can save you a big headache later.