Monday, November 17, 2014, AM | Leave Comment
I get a couple of phone calls every other week about “new and improved” investment opportunities. If you get them too, that’s because many folks have lost so much in the recent worst recession, they might be vulnerable and anxious to get the return on their investments they never got.
It’s very easy to fall prey to these unsolicited – to say the least – overtures [An offer, or proposal that indicates readiness to undertake a course of action].
But be warned and beware that these solicitations may be nothing but hoax.
Never invest with phone marketers
It is alright to deal on the phone with a broker or mutual fund adviser that you already know. But never deal with a stranger who calls you. Of course, some calls may be legitimate, but very few are. Just hang up.
Never invest when a seller tries to rush you or impose a time limit. Any legitimate investment should give you plenty of printed information to read. It must give you plenty of time to digest it, do research on your own, and ask questions.
Online investment advice alert
Online investment advice varies greatly in quality. A lot of excellent information about investments is available on the Internet.
However, scam artists also operate in this unregulated environment.
The responsibility falls then on the consumers’ shoulders to differentiate between a legitimate operation and a scam.
Don’t rely on investment newsletters
Some investment advisers find two dates between which their picks beat the market.
These are then advertised when newsletters promote how they do it, hiding the dates when they didn’t.
A second way letters mislead is by publicizing a few picks that beat the market, while ignoring many others that didn’t.
In fact, various surveys show, around 80% of letter editors fail to even match the market over time.
Rule of thumb
Use the Internet to collect data that help you form your own opinion. Beware of hype and promises delivered online. You must be aware of the following to avoid huge mistakes when investing:
- Don’t assume for a minute that bulletin boards check out and police those who make claims through them.
- Don’t rely on advice received from persons who hide their identity.
- Don’t believe any claims about “inside information” or “pending news releases.”
- Don’t overlook the conflict of interest that exists when a person who solicits you for an investment opportunity but is also selling it.
In a Nutshell
Investment should be fun and fruitful over the long term. It is not as scary or as hard as it seems.
Here are five rules for becoming a successful investor:
Reduce your risk by putting your investment dollars in a diversified portfolio.
Reduce your investment cost by dollar cost averaging.
Hold on to investments for as long as you can.
Plan well in advance to draw cash out of your investments to meet your expected financial needs.
Pay next to nothing to acquire, hold or liquidate your holdings by buying no-load investments.