Investor Assistance (800) 732-0330 www.investor.gov

INVESTOR BULLETIN

13 Things Everyone 

Should Know About Investing

Whether you’re a first-time investor or have been 

investing for many years, there is some basic information 

you should know about investing. Below is a list of 

thirteen pieces of investing-related information that 

may help you make informed financial decisions and 

avoid common scams. 

Checking the background of an investment 

professional is easy and free. Details on an 

investment professional’s background and qualifications 

are available through the Investment Adviser Public 

Disclosure website and FINRA BrokerCheck. If you 

have any questions on checking the background of an 

investment professional, call the SEC’s toll-free investor 

assistance line at (800) 732-0330.

It can be costly to ignore the fees associated 

with buying, owning, and selling an investment 

product. Expenses vary from product to product, and 

even small differences in these costs can translate into 

large differences in earnings over time. An investment 

with high costs must perform better than a low-cost 

investment to generate the same returns for you. In 

addition, some products are designed to be long-term 

investments. If you need your money early, you may 

need to pay substantial surrender fees.

Diversification can help reduce the overall 

risk of an investment portfolio. By picking the 

right 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 find that it is easier to achieve 

diversification through ownership of mutual funds or 

exchange-traded funds rather than through ownership 

of individual stocks or bonds. 

Paying off high-interest debt may be your best 

“investment” strategy. Few investments pay off as 

well as, or with less risk than, eliminating high-interest 

debt on credit cards or other loans. 

Promises of high returns, with little or no 

associated risk, are classic warning signs for 

fraud. Every investment carries some degree of risk and 

the potential for greater returns comes with greater risk. 

Ignore so-called “can’t miss” investment opportunities 

or those promising “guaranteed returns” or, better yet, 

report them to the SEC.

Any offer or sale of securities must be either 

registered with the SEC or exempt from 

registration. Otherwise, it is illegal. Registration 

is important because it provides investors access to 

key information about the company’s management, 

products, services, and finances. While many companies 

that do not register or file reports with the SEC may be 

legitimate investments, you assume more risk when you
invest in a company about which little or no information 

is publicly available. Smart investors will 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.

It can be risky to invest heavily in shares of 

any individual stock. In particular, you should think 

twice before investing heavily in shares of your employer’s 

stock. If the value of your employer’s shares declines 

significantly, or the company goes bankrupt, you may lose 

money and there’s a chance you might lose your job, too. 

Active trading and some other very common 

investing behaviors actually undermine 

investment performance. According to researchers, 

other common investing mistakes include focusing on 

past performance, favoring investments from your own 

country, region, state or company, and holding on to 

losing investments too long and selling winning 

investments too soon. 

Research shows that con-artists are experts 

at the art of persuasion, often using a variety 

of influence tactics tailored to the vulnerabilities 

of their victims. Common tactics include phantom 

riches (dangling the prospect of wealth, enticing you 

with something you want but can’t have), source 

credibility (trying to build credibility by claiming to be 

with a reputable firm or to have a special credential or 

experience), social consensus (leading you to believe that 

other savvy investors have already invested), reciprocity

(offering to do a small favor for you in return for a big 

favor) and scarcity (creating a false sense of urgency by 

claiming limited supply). 

Some investments provide tax advantages. 

For example, employer-sponsored retirement plans 

and individual retirement accounts generally provide 

tax advantages for retirement savings, and 529 college 

savings plans also offer tax benefits. Individuals who 

are interested in learning about the tax impact of their 

investment decisions should consult their tax adviser 

or visit the IRS website.

Mutual funds, like other investments, are not 

guaranteed or insured by the FDIC or any other 

government agency. This is true even if you buy a 

mutual fund through a bank and the fund carries the 

bank’s name. 

The key to avoiding investment fraud, 

including scams that target specific groups, 

is using independent information to evaluate 

financial opportunities. We see too many investors 

who might have avoided trouble and losses if they had 

asked questions from the start and verified the answers 

with sources outside of their family, community, or group. 

Unbiased resources are available to help 

individuals make informed investing decisions.

Whether checking the background of an investment 

professional, researching an investment, or learning 

about new products or scams, unbiased information 

can be a significant advantage for investing wisely. A 

good starting point for this information is the SEC’s 

Investor.gov website. 

The Office of Investor Education and Advocacy 

has provided this information as a service to 

investors. It is neither a legal interpretation nor 

a statement of SEC policy. If you have questions concerning the meaning or application of 

a particular law or rule, please consult with an 

attorney who specializes in securities law.

SEC Pub. No. 136 (12/12)