It is no longer sufficient to be a “saver.” Saving money in a bank account is a critical first step to any long-term family financial plan. But after saving sufficient funds for dealing with expenses, both ordinary and unexpected, a long-term financial plan must reach beyond a savings account. Many Americans — now more than ever — have a relationship with a brokerage firm, to buy and sell stocks and other financial securities. Here are some things you should keep in mind.
1. Investigate before you invest.
Almost all brokerage firms and individual brokers are registered with the Financial Industry Regulatory Authority. FINRA is a “self-regulatory organization” under federal securities laws. FINRA operates “Broker Check,” which investors can access at https://brokercheck.finra.org/. This allows you to review the regulatory compliance history of the firm, and the individuals, you are dealing with.
2. Read your paperwork every month.
Take the time to review any changes to your account every month. If you’ve chosen electronic document delivery, log on at least once a month. This has a number of benefits. It compels you to stay abreast of your holdings, and it will alert you to any transaction you do not recognize. Such events are rare but can be very consequential. If you do find a transaction you do not understand, by all means call the brokerage. But … and this is important … if there is an error in your account, make sure to write to your brokerage firm about the error. Should there be any question about the validity of any transaction, you want to be able to say that the transaction was recognized quickly and documented as soon as possible.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
3. Understand your investments.
If you don’t understand an investment, then you shouldn’t be involved in it. Here is an actual investment pitch: “Objectives are achieved through a top-down, bottom-up process that identifies disparities in the economy or securities sectors, creating +/- changes in market perception.” Huh?
4. Understand that no investment is guaranteed.
Unlike bank deposits, investing involves risk. No one can assure you that any one of your investments is foolproof. Indeed, if you are told by any party, be it a brokerage firm, or any other person soliciting your money, that the investment is guaranteed, beware.
5. Make sure your securities are held by an SIPC member brokerage firm.
Brokerage firm failures are rare. However, if for any reason your securities broker cannot return your securities to you, you have certain protections available to you from the Securities Investor Protection Corp. To learn more about SIPC, how you are protected, and the limits of that protection, visit the SIPC website at www.sipc.org. You can check on the website to assure that your brokerage firm is, in fact, a member of SIPC.
-
Stock Market Today: Have We Seen the Bottom for Stocks?Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
-
Is the GOP Secretly Planning to Raise Taxes on the Rich?Tax Reform As high-stakes tax reform talks resume on Capitol Hill, questions are swirling about what Republicans and President Trump will do.
-
Social Security Is Taxable, But There Are WorkaroundsIf you're strategic about your retirement account withdrawals, you can potentially minimize the taxes you'll pay on your Social Security benefits.
-
Serious Medical Diagnosis? Four Financial Steps to TakeA serious medical diagnosis calls for updates of your financial, health care and estate plans as well as open conversations with those who'll fulfill your wishes.
-
To Stay on Track for Retirement, Consider Doing ThisWriting down your retirement and income plan in an investment policy statement can help you resist letting a bear market upend your retirement.
-
How to Make Changing Interest Rates Work for Your RetirementHigher (or lower) rates can be painful in some ways and helpful in others. The key is being prepared to take advantage of the situation.
-
Within Five Years of Retirement? Five Things to Do NowIf you're retiring in the next five years, your to-do list should contain some financial planning and, according to current retirees, a few life goals, too.
-
The Home Stretch: Seven Essential Steps for Pre-RetireesThe decade before retirement is the home stretch in the race to quit work — but there are crucial financial decisions to make before you reach the finish line.
-
Three Options for Retirees With Concentrated Stock PositionsIf a significant chunk of your portfolio is tied up in a single stock, you'll need to make sure it won't disrupt your retirement and legacy goals. Here's how.
-
Four Reasons It May Be Time to Shop for New InsuranceYou may be unhappy with your insurance for any number of reasons, so once you've decided to shop, what is appropriate (or inappropriate) timing?
