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.
-
Kohl’s to Close 27 Stores in March 2025 — Is Your Location on the List?Kohl’s is closing 27 stores this Saturday as part of its 2025 restructuring plan. Find out which locations are affected and why they’re closing.
-
Stock Market Today: It's Going to Stay Choppy for StocksAuto-focus can show us a lot about uncertainty on the ground and in the stock market.
-
Revocable Living Trusts: The Good, the Bad and the UglyPeople are conditioned to believe they should avoid probate at all costs, but when compared with living trusts, probate could be a smart choice for some folks.
-
How to Plan for Retirement When Your Child Has Special NeedsWhen your child has special needs, your retirement plan should include a plan for when you'll no longer be able to care for them yourself. A five-step guide.
-
Tax Advantages of Oil and Gas Investments: What You Need to KnowTax incentives allow for deductions and potential tax-free earnings — benefits accessible only to accredited investors in small producer projects.
-
Charitable Contributions: Five Frequently Asked QuestionsMake the most of your good intentions by understanding the ins and outs of charitable giving. A good starting point is knowing what's deductible and what isn't.
-
Financial Leverage, Part Two: Don't Say We Didn't Warn YouA lesson in how highly leveraged investments can benefit the first movers and crush the next round of buyers.
-
Taxes in Retirement: What ESOP Participants Need to KnowMost Employee Stock Ownership Plans (ESOP) participants transfer company stock to an IRA starting around age 55, so taxes on that money have been deferred.
-
Would You Benefit From Investing in Cryptocurrency?Understanding the complexity of adding digital currency to your investments is critical, especially since drastic price changes can happen very quickly.
-
Why Company Stock May Be Riskier Than Employees RealizeStock compensation has its perks, but employees must be realistic (and unemotional) about their investments' prospects. Sometimes strategic sales are smart.
