Description
This article is from the What Every
Investor Should Know.
Protect Yourself
You should be as careful about buying securities as you would be
about any other costly purchase. The vast majority of securities
professionals are honest, but be aware that misrepresentation and
fraud do take place. Observe the following basic safeguards when
"shopping" for investments:
- Don't buy securities offered in unsolicited telephone calls or
through "cold calls"--ask for information in writing before you
decide.
- Beware of salespeople who try to pressure you into acting
immediately.
- Don't buy on tips or rumors. Not only is it safer to get the facts
first, but also it is illegal to buy or sell securities based on
"inside information" which is not generally available to other
investors.
- Get advice if you don't understand something in a prospectus or a
piece of sales literature.
- Be skeptical of guarantees or promises of quick profits.
- Check on the credentials of anyone who tries to sell you
securities.
- Remember that prior success is no guarantee of future success in
an investment arrangement.
- Be especially careful with certain tax-sheltered investments,
partnerships, and other "illiquid" investments. Ask about the
liquidity and understand that there may not be a ready market when you
want to sell.
- Be sure you understand the risks involved in trading securities,
especially options and those purchased on margin.
- Don't speculate. Speculation can be a useful investment tool for
those who can understand and manage the risks involved and those who
can afford to lose money. For the average investor, more conservative
investment strategies are generally appropriate.
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