As many of you know, I write about finance in my
blog called “Bond Investments.” I do this to bring about financial
education to people who do not have the opportunity to learn about this
social economic activity that is beneficial to them and their families.
In my day, families did not learn about such activity and why it is
important for their children and grandchildren’s futures. As a matter of
fact, many people feel that it is rude or somehow against social
standards to talk about finance. This is the main reason why many groups
of people are behind economically. They or their parents never learned
about personal financial activity. In about two weeks, in my blog, “Bond
Investments”, I will start a series on how to start investing for your
own person objectives. I suggest that you and your family start
reviewing this blog. Many people around the world are reading my blog
today. Why not you?
The
Pennsylvania Securities Commission cosponsored a consumer education
conference at the Radisson in Camp Hill Pennsylvania with the Investor
Protection Trust and the AARP organization on October 20, 2011. The
conference enlightened the public in managing your money effectively,
starting investing for your future and reevaluating your retirement. The
keynote presenters were Pam Krueger and Jack Gallagher of the TV show
MoneyTrack.
In
these seminars, people could get free booklets on just about anything
to do with investing or speculating in financial markets. Don’t get me
wrong! For people who read my material on a regular bases, they know I
am an investor not a speculator. For the most part, I stay away from
Mutual Funds and invest mainly in discounted bonds (Junk Bonds). But a
difference in opinions is what makes a market. You never know what you
are going to learn in these seminars.
PACE
LAW SCHOOL and FINRA Investor Education Foundation gave out a free
booklet called “How to Prevent and Resolve Disputes with Your Broker.”
Here are several things that should keep you out of trouble with the
investment industry.
1. Understand
that all investments involve risk. Know that the risk (Market Risk)
that the investment principal will decline in value if the price falls
and you sell for less than what you paid.
2. Research
the broker and the brokerage firm you select. Know what you want out of
your broker. Do you need to walk into a brokerage firm to meet with
your broker or are you ‘OK” with working with an online broker? Know how
much the expenses will be for the brokerage firm that you are dealing
with. Are they insured by Securities Investor Protection Corporation
(SIPC)? Are they licensed with your state’s insurance commissioner? www.naic.org
3. Are they registered to buy and sell securities? www.finra.org/BrokerCheck
4. Most
people invest to achieve specific financial goals. So you want to
approach your broker with your investment goals and communicate them
clearly to them.
5. Know
if you have the right to dispute any problems that come up between you
and your broker. Most brokerage account agreements contain a pre-dispute
arbitration clause, requiring arbitration instead of court action.
6. Know
who has the right to buy and sell securities in your account. A
discretionary account means that your broker has the right to buy and
sell without your permission. Having this type of account is your choice
that you pick when you open your account.
7. Know
if you want the ability to borrow funds against your account. This is
called a margin account. You do not have to open a margin account. You
can open a cash account. This account does not allow borrowing of cash
or securities and is far safer to own.
8. Learn
the fee schedule of your brokerage services. Investing with a
brokerage firm cost money. Ask about all fees as well as other cost. Get
this in writing. Know how your broker is paid. Each type of investment
may have fees. Know what they are before you invest. For example, a
mutual fund may have no fees when purchased but has several fees paid
within the fund that you do not see. The fees paid for services may
influence your broker’s investment recommendations to you.
9. Understand
the investments that you are getting into before you commit money. This
will help you form realistic expectations, avoid disputes with your
broker, and make better buy, sell, and hold decisions. You should get
from your broker;
a. Why is this investment good for you
b. How the investment works
c. How the investment gains value and deceases in value
d. Does it pay dividends or interest
e. How much risk are you taking
f. How easy is it to sell the investment once purchased.
10. Your
brokerage agreement is a legal contract between you and the brokerage
firm. Make sure you read and understand all the documents that you sign.
Make sure you are receiving your statements. If you opt to receive them
on line, make sure you receive them by email or on your account web
page. The law expects you to read them and review your trades. In legal
disputes, courts and arbitrators generally do not favor investors who
rely on oral statements from a broker that contradicts the written
statements. Ask questions if you do not understand anything in these
documents.
11. Investing
your money should be managed like a business. Keep documents and notes
of conversations with our broker. You may need them for tax reasons or
for settling disputes.
12. Report any problems with your account immediately and in writing.
13. Asking
questions is the best way to invest wisely and to avoid
misunderstandings between you and your broker. You are taking the risk
of investing. If you assume that your broker is telling you everything
then you are making a grave mistake. Brokers are not mind readers and
you are the one with your best interest at heart.
