Before you invest,ask questions

Before you invest,
ask questions.
That’s the best advice we can give you about how to invest wisely. We see too many investors who might have
avoided trouble and losses if they had asked basic questions from the start.
It doesn’t matter if you are a beginner or have been investing for many years — it’s never too early or too late
to start asking questions. It’s almost impossible to ask a dumb question about how you are investing your
money. Don’t feel intimidated. Remember, it’s your money at stake. You are paying for the advice of your
investment professional.
A good broker or investment adviser will welcome your questions, no matter how basic. Financial professionals
know that an educated client is an asset, not a liability. They would rather answer your questions before you
invest than confront your anger and confusion later.
In this brochure, you’ll find some questions that you should ask about investment products and the people who
sell those products. We’ve also included some tips on how to monitor your investments and handle any problems.
Keep this brochure on hand when considering an investment and use it by asking the right questions before
you buy. Have a pen and piece of paper ready to take notes on the answers. They can come in handy if there is
a dispute later about what was said during the transaction. Taking notes also sends a signal to your broker: I’m a
smart and serious investor who wants to know more about the risks and rewards of investing.
Questions about products
• Is this investment product registered with the SEC and my state securities agency?
• Does this investment match my investment goals? Why is this investment suitable for me?
• How will this investment make money? (Dividends? Interest? Capital gains?) Specifically, what must happen
for this investment to increase in value? (For example, increase in interest rates, real estate values, or market
share?)
• What are the total fees to purchase, maintain, and sell this investment? After all fees are paid, how much
does this investment have to increase in value before I break even?
• How liquid is this investment? How easy would it be if I needed my money right away?
• What are the specific risks associated with this investment? What is the maximum I could lose? (For example,
what will be the effect of changing interest rates, economic recession, high competition, or stock
market ups and downs?)
• How long has the company been in business? Is its management experienced? Has management been successful
in the past? Have they ever made money for investors before?
• Is the company making money? How are they doing compared to their competitors?
• Where can I get more information about this investment? Can I get the latest reports filed by the company
with the SEC: a prospectus, offering circular, or
the latest annual report and financial statements?
Questions about mutual funds
• How has this fund performed over the long run? Where can I get an independent evaluation of this fund?
• What specific risks are associated with this fund?
• What type of securities does the fund hold? How often does the portfolio change?
• Does this mutual fund invest in any type of securities that could cause the value to go up or down rapidly in
a short period of time? (For example, derivatives?)
• How does the fund perform compared to other funds of the same type or to an index of the same type of
investment?
• How much will the fund charge me when I buy shares? What other ongoing fees are charged?
Questions for the people who sell investments
• Are you registered with our state securities regulator? Have you ever been disciplined by the SEC, a state
regulator, or other organization? (For example, the National Association of Securities Dealers or one of the
stock exchanges. You can call NASD at (800) 289-9999 to verify a broker’s disciplinary history.)
• What training and experience do you have? How long have you been in the business?
• What is your investment philosophy?
• Describe your typical client. Can you provide me with some names and telephone numbers of your longterm
clients?
• How do you get paid? By commission? Amount of assets you manager? Another method?
• Do I have any choices on how I pay you? Should I pay you by the transaction? Or a flat fee regardless of how
many transactions I have?
• Do you make more if I buy this stock (or bond, or mutual fund) rather than another? If you weren’t making
extra money, would your recommendation be the same?
• Are you participating in a sales contest? Is this purchase really in my best interest, or are you trying to win a
prize?
• You’ve told me what it costs to buy this stock (bond, or mutual fund); how much will I receive if I sell it
today?
• Where do you send my order to be executed? Can we get a better price if we send it to another market?
• If your broker changes firms, ask: Did they pay you to change firms? Do you get anything for bringing me
along?
Investor tip
When you ask these questions, write down the answers you receive and what you decided to do. If something goes
wrong, your notes can help to establish what was said. Let your broker or investment adviser know you’re taking
notes. They’ll know you’re a serious investor and may tell you more.
Division of Finance and
Corporate Securities
350 Winter St. NE, Rm. 410
Salem, OR 97301-3881
Phone: (503) 947-4387
Fax: (503) 947-7862
Web site: www.cbs.state.or.us/dfcs
Questions about the progress of your investments
• How frequently do I get statements? Do I understand what the statement tells me?
• Is the return on my investment meeting my expectations and goals? Is this investment performing as I was
led to believe?
• How much money will I get back if I sell my investment today?
• How much am I paying in commission or fees?
• Have my goals changed? If so, are my investments still suitable?
• What criteria will I use to decide when to sell?
How to handle problems
Act promptly! By law, you have a limited time in which to take legal action. Follow these steps to solve your
problem:
1. Talk to your broker and explain the problem. Where is the fault? Were communications clear? Refer to your
notes. What did the broker tell you? What do your notes say?
2. If your broker can’t resolve your problem, then talk to the broker’s branch manager.
3. If the problem is still not resolved, write to the compliance department at the firm’s main office. Explain
your problem clearly. Explain how you want it resolved. Ask the compliance office to respond to you within
30 days.
4. If you’re still not satisfied, send a copy of your letter to your state securities administrator or to the Office of
Investor Education and Assistance at the SEC.
At the SEC, we will research your complaint, contact the firm or person you have complained about, and ask
him or her to respond to your complaint or question. Sometimes our intervention yields a satisfactory result. If
these steps don’t work, you may need to take legal action on your own. We can send you information on mediation
and arbitration, and suggest how to locate a lawyer if you need one.