A Few Simple Ways to Prevent Bad Investments
Investments need to match your goals and tolerance for risk. Brokers are legally responsible for putting you in investments appropriate for your experience, net worth, annual income, investment objectives and other factors.
Brokers, however, may abandon their obligations, given a chance to make themselves a profit. For instance, they may tout high-risk investments that are not suitable for older investors, but provide brokers with great commissions.
To prevent such investment failures, investors need to be actively involved in determining investment suitability. Some tips from the Philadelphia Securities Commission:
• Be completely honest when providing information to determine your investments. Don’t try to impress with an inflated financial status. Your broker relies on this information to make the right investment for you. If he doesn’t, the inaccurate information you provided makes this your fault, not your broker’s.
• Don’t invest in anything you don’t understand. If you can’t explain it clearly so a friend can understand it, forget about it. Read up on investments, ask questions of brokers and other professionals, even take a course in investing.
• Invest no more than you can afford to lose without hardship. Put your money somewhere else if you can’t be without it. There is no risk-free investment, and if your broker tells you otherwise, he’s not to be trusted.
• If you think you may be inappropriately invested, tell your broker, both orally and in writing.