The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to help military personnel make more informed savings and investing decisions and avoid common scams. Below is a list of ten suggestions that may help military personnel – and any investor – make better investments and avoid fraud.
Paying off high interest debt may be your best strategy. Paying off debt over time can be expensive. Few investments pay as well as eliminating high-interest debt on credit cards or other loans. You should also take steps to improve your credit score, which matters when applying for a new job or mortgage, or renting an apartment.
Financial security is best reached by saving and investing over a long period of time. Set goals and make a plan. Smart money management begins with savings. Determine how much you need to save each week, month, or year to meet your goals. By investing some of that money, you can make it work for you through appreciation and compound interest.
Take advantage of the Thrift Savings Plan (TSP). The TSP is the government’s defined contribution plan and one of your best options for retirement savings. Contributions are automatically deducted from salary and either “tax-deferred” or “tax-exempt” depending upon the type of pay the contributions come from. The TSP website (TSP.gov) explains the benefits available to the military.
Be wary of any investment that sounds too good to be true. Claims that an investment is a “CAN’T MISS” opportunity or a “BREAKOUT STOCK PICK,” or promises of “GUARANTEED RETURNS,” are classic warning signs of fraud. Be alert to any promises of high returns with little or no risk.
Look out for pressure to buy RIGHT NOW. Don’t be pressured into buying an investment before you have a chance to think about and research the “opportunity.”
Be Alert to Affinity Fraud. Affinity frauds target members of identifiable groups, such as the elderly, religious or ethnic communities, or the military. Even if you know the person making the investment offer, be sure to check out the investment and the person’s background – no matter how trustworthy the person seems.
Check out the qualifications of an investment professional – even one located near a military base. Details on an investment professional’s background are available through the SEC’s Investment Adviser Public Disclosure website and FINRA’s BrokerCheck. If you have questions, call the SEC’s toll-free investor assistance line at (800) 732-0330.
Don’t ignore investment fees. Expenses associated with purchasing, holding, and selling an investment vary from product to product, and even small differences in these costs can have a significant impact on earnings over time.
Diversification can reduce the overall risk of an investment portfolio. By picking a mix of investments, you may be able to limit your losses and reduce the fluctuations of your investment returns without sacrificing too much in potential gains. Some investors achieve diversification through ownership of mutual funds or exchange-traded funds.
Be on the lookout for fraudulent unregistered offerings. Any offer or sale of securities must be either registered with the SEC or exempt from registration. Otherwise, it is illegal. While many companies that do not register or file reports with the SEC may be exempt from registration, you assume more risk when you invest in a company about which little or no information is publicly available. You should always check whether an offering is registered with the SEC by using the SEC’s EDGAR database or contacting the SEC’s toll-free investor assistance line at (800) 732-0330.
