Securities are a financial investment regulated by the government. Examples include: government securities, stocks, bonds, and mutual funds. As a general guide to investing, to avoid heavy losses and investor fraud steer clear of more complicated securities and schemes. Here’s a guide to investing for beginners to help you start investing and avoid being fleeced.
The new investor is often nervous about making a financial investment because you don’t see or get anything tangible when you write out your check. It’s not like buying real estate or silver bars. On top of that, just the other day another financial scam was uncovered in Florida. A lawyer and associates bilked $1 billion from unsuspecting investors, selling a financial investment that didn’t even exist.
No wonder investing for beginners is scary business. You can get cheated through fraud, scams and schemes. Or you can lose your nest egg in legal securities where the new investor does not belong. Here are some tips for self defense… where not to invest when you start investing.
As a general guide to investing, walk away from anyone who gives you the HARD SELL promising high returns with little risk. Run if they pressure you to make a decision on the spot. Do not buy a financial investment from anyone who is not licensed through the National Association of Securities Dealers (NASD). The smoothest operators lead you to believe that their investment opportunity is not available to just anyone, and that you need to act now. They often lack a securities license, and are not offering a registered security.
Some legal securities are complicated and involve a high degree of risk. Examples include stock options, futures contracts, leveraged and inverse ETFs, and derivatives in general. The new investor should stick with listed stocks and bonds that are publicly traded on exchanges; and money market or government securities.
In fact, I’ll take that last statement one step further. Investing for beginners should focus on mutual funds that invest in stocks, bonds, and the money market. That’s the best way to start investing and avoid being fleeced. Mutual funds are a financial investment that is heavily regulated, and anyone who sells them directly to the public needs a license to do so.
A registered rep with a license might sell you a poor performing fund, but if he cheats you and gets caught he’s in a world of hurt. The NASD frowns on investor fraud; they are there to protect you.
A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals. Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.