15 Investment Tips for 2015

from the Securities and Exchange Commission

Whether you’re a first-time investor or have been investing for years, here are fifteen tips to help you make more informed financial decisions and avoid common investment scams in 2015.

Always check the background of an professional — it is easy and free. Details on an investment professional’s background and qinvestment ualifications are available through the SEC’s Investment Adviser Public Disclosure website and FINRA’s BrokerCheck. If you have any questions on checking the background of an investment professional, call the SEC’s toll-free investor assistance line at(800) 732-0330.

Promises of high returns, with little or no associated risk, are classic warning signs of fraud.Every investment carries some degree of risk and the potential for greater returns comes with greater risk. Ignore so-called “can’t miss” investment opportunities or those promising “guaranteed returns.” Better yet, report them to the SEC.

Paying off high-interest debt may be your best “investment” strategy. Few investments pay off as well as eliminating high-interest debt on credit cards or other loans.

It can be costly to ignore the fees associated with buying, owning, and selling an investment product. Expenses vary from product to product, and even small differences in these costs can translate into large differences in earnings over time.

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.

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. While many companies that do not register or file reports with the SEC may be legitimate investments, you assume more risk when you invest in a company about which little or no information is publicly available. 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.

Active trading and some other very common investing behaviors actually 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.

Research shows that con-artists are experts at the art of persuasion, often using a variety of influence tactics tailored to the vulnerabilities of their victims. Common tactics includephantom riches (dangling the prospect of wealth, enticing you with something you want but can’t have), source credibility (trying to build credibility by claiming to be with a reputable firm or to have a special credential or experience), social consensus (leading you to believe that other savvy investors have already invested), reciprocity (offering to do a small favor for you in return for a big favor) and scarcity (creating a false sense of urgency by claiming limited supply).

Some investments provide tax advantages. For example, employer-sponsored retirement plans and individual retirement accounts generally provide tax advantages for retirement savings, and 529 college savings plans also offer tax benefits. Individuals who are interested in learning about the tax impact of their investment decisions should consult their tax adviser or visit the IRS website.

Mutual funds, like other investments, are not guaranteed or insured by the FDIC or any other government agency. This is true even if you buy a mutual fund through a bank and the fund carries the bank’s name.

Be careful when using social media as an investment tool. Social media and the Internet have become important tools for investors. While social media can provide benefits for investors, it also presents opportunities for fraudsters to lure investors into a wide range of investment scams. You should carefully consider any investment opportunity you learn about through social media and always be on the look out for fraud. For additional information on ways to avoid fraud through social media please read the SEC’s bulletin on Social Media and Investing.

It can be risky to invest heavily in shares of only one stock. In particular, think twice before investing heavily in shares of your employer’s stock. If the value of your employer’s shares declines significantly, or the company goes bankrupt, you may lose money.

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.

Unbiased resources are available to help individuals 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 good starting point for this information is the SEC’s Investor.gov website.

If you have questions about your investments, your investment account or a financial professional, don’t hesitate to contact the SEC’s Office of Investor Education and Advocacyonline or on our toll-free investor assistance line, (800) 732-0330.