10 Investment Tips for 2017

By the Securities and Exchange Commission’s Office of Investor Education and Advocacy

Whether you are a first-time investor or have been investing for years, here are 10 tips from the SEC’s Office of Investor Education and Advocacy to help you make better informed investment decisions and avoid common scams in 2017.

1. Always check the background of an investment professional—it’s easy and free. You can find details of an investment professional’s background and qualifications through the search tool on the SEC’s website for individual investors, Investor.gov.

2. Promises of high returns with little or no risk are classic warning signs of fraud. Every investment carries some degree of risk and the potential for greater returns often correlates with greater risk. Ignore so-called “can’t miss” and “guaranteed risk-free” investment opportunities.

3. Be careful when using social media as an investment tool. Social media and the internet have become important tools for investors, but also present opportunities for fraudsters to lure investors into a wide range of scams.

4. It can be costly to ignore fees associated with buying, owning, and selling an investment product. Expenses vary from product to product, and even small differences in costs can mean large differences in earnings over time. An investment with high costs must perform better than a low-cost investment to generate the same returns.

5. Be alert to affinity fraud. Affinity frauds target members of identifiable groups, such as the elderly, religious or ethnic communities, or the military. Even if you know the person making the investment offer, be sure to check out the investment and the person’s background—no matter how trustworthy the person seems.

6. Any offer or sale of securities must be either registered with the SEC or exempt from registration. Otherwise, it is illegal. Registration is important because it provides investors access to key information about the company’s management, products, services, and finances. Always check whether an offering is registered with the SEC by using the SEC’s EDGAR database or contacting the SEC’s toll-free investor assistance line at (800) 732-0330.

7. Diversification can help reduce the overall risk of an investment portfolio. By picking the right mix of investments, you may be able to limit your losses and reduce the fluctuations of your investment returns without sacrificing too much in potential gains. Some investors find that it is easier to achieve diversification through ownership of mutual funds or exchange-traded funds rather than through ownership of individual stocks or bonds.

8. Did you know that active trading and some other very common investing behaviors actually can undermine investment performance? According to researchers, other common investing mistakes include focusing on past performance, favoring investments from your own country, region, state, or company, and holding on to losing investments too long and selling winning investments too soon.

9. If you are investing or saving toward a goal, or just want to learn about how your money can grow under various hypothetical scenarios, take advantage of our compound interest and savings goal calculators. These calculators are great tools to help inform any decisions you make about your investing and saving.

10. Unbiased resources are available to help you make informed investing decisions. Whether checking the background of an investment professional, researching an investment, or learning about new products or scams, unbiased information can be a significant advantage for investing wisely. A great starting point is Investor.gov.

If you have questions about your investments or investment professional, contact the SEC’s Office of Investor Education and Advocacy online or on our toll-free investor assistance line at (800) 732-0330.

Learn more about saving and investing at Investor.gov, the SEC’s website for individual investors. Members of the military can also find additional resources at the Investor.gov Military page.

 

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