Older Investors
Learn Investing Basics
If you are new to investing or just want a refresher, here are some investing basics.
Investing in securities has risks. You can try and lower the risk of losing your money by spreading it among different investments that have different risk and return characteristics. This practice is called diversification. An important concept related to diversification is asset allocation, which is how you divide your money among the different investments that you have.
When making investing decisions, consider how much risk you are willing to take with your money. Typically the potential for profit (or higher return) comes with a greater chance of losing money (or risk). As your financial circumstances change and/or the securities markets go up and down, you might want to readjust how your money is allocated among your different investments. This is called rebalancing.
Never Stop Learning Tip: Review the asset allocation of your investments every six to 12 months to determine if you need to rebalance or change any of your investments.
Monitor your accounts
Review your account statements regularly. Talk with your investment professional about the account statement and ask any questions you have.
Check the information in each account statement. What are you looking for?
- Any fraud or activity that you didn’t authorize.
- How your investments are doing – are you on track to have enough money to make it through retirement?
- Whether you need to rebalance your investments because of market movements or because you are getting closer to retirement.
- Whether you should consider selling any investments for year-end tax purposes.
- What fees you are paying.
If you create an online account for your investments, take control of your privacy and security settings. Use a strong password and consider activating two-step/multifactor verification. Learn more at Updated Investor Bulletin: Protecting Your Online Investment Accounts from Fraud.
Never Stop Learning Tip: Review your account statements every month. If there are any issues, take care of them immediately.
Add a trusted contact
Consider adding a trusted contact person to your brokerage account.
A trusted contact is a person your brokerage firm will contact if your broker believes your account may be exposed to possible financial exploitation or fraud. Your broker will also contact your trusted contact person in other situations too, for example, if they are having trouble reaching you or if they suspect you are sick or suffering from diminished capacity. Naming someone as a trusted contact person does not give that person any authority to act on your behalf, execute transactions, or engage in activity in your account. Read our Investor Bulletin: Please Consider Adding a Trusted Contact to Your Account to learn more.
Never Stop Learning Tip: Add a trusted contact person to your brokerage account. If you have named a trusted contact, confirm every year that any information you provided to the brokerage firm is accurate.
Understand Fees
Pay attention to fees. Even small fees can have a major impact on your investment portfolio over time.
You may pay fees for owning an investment, buying or selling an investment, and any advice or help regarding investments you get from an investment professional. Understand the fees you pay and ask questions about them. To read more about fees, read our Updated Investor Bulletin: How Fees and Expenses Affect Your Investment Portfolio. To compare the fees of over 30,000 mutual funds and ETFs, use FINRA’s Fund Analyzer.
Never Stop Learning Tip: For any new investment, check out its fees and expenses before you invest. For any current investments, review the fee information each year.
Research Investments
Always research an investment before making a decision – and don’t forget to ask questions.
Make sure you get the disclosure documents for the investment and read them. Many types of securities and investment products have a prospectus and/or shareholder reports, along with other disclosures, to help explain the investment. Find the most recent documents online on a fund’s or your investment professional’s website. Or go to the SEC’s EDGAR database. Read Using EDGAR to Research Investments to learn more about using the database to find the information you need. Ask your investment professional questions about why this investment is good for you.
Never Stop Learning Tip: For any new investment, take your time and do your research before you invest. For any current investments, review their disclosure documents at least once per year.
Research Professionals
Do a background check on your investment professional and firm to learn important information about them.
You can research advisers and brokers for free at Investor.gov. Using Investor.gov’s “Check Out Your Investment Professional Tool”, you can:
- Find out if the investment professional is registered with SEC or a state regulatory authority.
- Find out if they have customer complaints or a disciplinary history. If they do, ask them about it.
- Get the firm’s Client/Customer Relationship Summary (Form CRS) and read it. This document can help explain the most important aspects of the investment firm and professional -- what services they can offer you and what you will pay for them.
Learn how to use the search tool by reading our Investor Bulletin: How to Use the Investment Professional Search Tool on Investor.gov.
Never Stop Learning Tip: Before you work with a new investment professional, take your time and do your research. If you are working with an investment professional, check their background on Investor.gov every year for disciplinary actions and to confirm they are still registered.
Plan for Illness
Prepare for future illness or diminished capacity by talking to family or friends and getting organized.
Talk to trusted family members or a trusted friend about your accounts and assets before anything happens. Organize your important documents now and keep them up-to-date. Make a list of all the important account information, contact information and policy numbers from these documents. Give a copy of the list to a trusted family member or a trusted friend or make sure they know where you keep the information. Provide your financial professional with trusted emergency contacts. To learn more about steps you can take, read CFPB’s Planning for diminished capacity and illness.
Never Stop Learning Tip: Create a “to do” list for preparing for future illness or diminished capacity. Make it a goal to get one task finished each month.
Tapping Your Nest Egg
Consider how and when to take money out of your investment accounts.
Consider whether rolling over a retirement account makes sense for you. For example, it might make sense for you if you want to consolidate multiple retirement accounts for convenience but it might not make sense if you will pay more in fees after rolling over your account. Rolling over money from one retirement account to another is a very specific process. If you don’t follow the rules, you may end up having to pay taxes. Visit the IRS’s website to learn more about rollovers at Rollovers of Retirement Plan and IRA Distributions.
When you need to take money from your account – called decumulation – consider how much you need to take out and when to take it out. This can include any RMDs (required minimum distributions). Be thoughtful regarding which assets you sell. Consider how selling those assets will affect your account’s diversification and whether you will need to rebalance your investments. Also consider any tax consequences, especially when taking money out of a tax-sheltered retirement account.
Never Stop Learning Tip: Create a plan for how and when to take money out of your investment accounts. Revisit and review the plan each year after you prepare your tax return.
Learn to Spot Fraud
Educate yourself about fraud and get help when you need it. Don’t be afraid to ask questions.
Fraudsters use your fears against you – your fear of running out of money; your fear of missing out on an investment opportunity or a sure thing; your fear of appearing unintelligent; or, your fear of falling behind. Don’t be misled. Instead, get educated about common fraud tactics by checking out our public service campaign, called HoweyTrade, which shows you what investment scams can look like, along with a video to help you learn how to spot and avoid fraud.
Submit a Complaint or Tip, or Report a Suspected Securities Fraud:
Ask for Help:
- SEC Office of Investor Education and Advocacy
- Email: help@sec.gov
- Telephone: 800-732-0330
- Questions and Feedback Online Form
- FINRA Securities Helpline for Seniors: 844-574-3577
Never Stop Learning Tip: Subscribe to Investor.gov’s monthly investing quizzes, which always contain a few questions on investment fraud. Take the quiz every month to stay sharp.
Learn more by reading our Guide for Older Investors.
