Fraud Tip of the Day - July 1

Essential Questions to Ask Prior to Investing your Money

Any time you're preparing to part with your money, asking plenty of shrewd questions is vital. The questions below are meant as a starting point for your conversations with those giving advice or selling an investment. Do lots of research on your own and don't limit yourself to what's on our list.

Investment Product Questions:

• Is this product registered with my state's securities agency and the Securities Exchange Commission?
  
  
• How does this product make money? What has to occur in order for it to make money?
  
  
• Why is this investment product appropriate for me?
  
  
• What's the total cost of purchasing this investment product? Fees to purchase, maintain and/or sell?
  
  
• How easy is it to sell this product if I need money right away?
  
  
• What are the risks involved with this investment? How much can I lose?
  
  
• Where can I get access to more information about this investment? Prospectus? Annual reports? Financial statements?
  
  
• If purchasing stock, ask questions about it - how long has the company been in business? Who are the executives? Are they experienced? Is the company making money? How do they compare with competitors?
  
  

Mutual Fund Questions

• What types of securities are in the fund?
  
  
• How often does the fund change? How often is it updated?
  
  
• What's the short and long term performance of this fund?
  
  
• What are the predictions for this fund in the short and long term?
  
  
• Is there an independent evaluation of this fund? Where can I find it?
• Are there any investments in this fund that could cause it to go up or down quickly, like derivatives?
  
  
• How has this fund performed compared to similar indices or other like funds?
  
  
• What are the fees associated with this fund? How much will I be charged each time I purchase shares? Are there any ongoing maintenance fees?
  
  
• If I change jobs, can I take my fund with me? How portable is it?

Investment Salesperson Questions:

• Are you personally registered with our state's securities agency? Have you ever been disciplined?
  
  
• How long have you been selling investment products?
  
  
• What's your training and educational background?
  
  
• How long have you been with this firm?
  
  
• What is your investment attitude?
  
  
• Would you be willing to supply reference information on former and current clients?
  
  
• How do you make money? Are you paid on commission? Salary? Percentage of the assets you manage? Or some combination of these?
  
  
• Are you incented on a single stock basis? Do you make more money if you sell one stock rather than another? What do you base your recommendations on?
  
  
• Does your firm sponsor sales contests? Is your recommendation really in my best interest or are you trying to win a contest?
  
  
• If your investment sales person changes firms, ask them: Were you paid to change firms? Did they give you any bonuses for bringing me along?
  
  

Keep in mind; these questions are just the beginning for a smart investor. High-quality questions may depend upon the services or investment opportunities offered to you. No questions are dumb. The worst thing you can do is not to ask any questions at all.

Investment Schemes

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