Whether you are a first-time investor or have been investing for years, here are 10 tips from the SEC’s Office of Investor Education and Advocacy to help you make better informed investment decisions and avoid common scams in 2025.

1. Avoid Relationship Investment Scams

An increasingly common scam is the relationship investment scam, in which fraudsters develop a relationship with an individual online then use that relationship to take advantage on the individual.  Fraudsters will often initiate contact with targets of the scam online or on social media platforms—including professional networking, dating, and messaging websites/apps. They might run online advertisements or add individuals to a group chat that the individuals didn’t seek to join.  Fraudsters might text a target pretending to be an old friend or claiming to have contacted the person accidentally.  Once they find a target who’s willing to engage with them, these fraudsters begin the long process of building their trust, be it through friendship, romance, or an offer to help achieve financial goals.  They then might offer their advice on trading or claim to know about profitable opportunities leading to an opening to take advantage of their target by, for example, enticing the person to invest on a fraudulent investment website.  To learn more about how to identify relationship investment scams and to avoid them, go here.

2. Watch Out for Pre-IPO Scams

Investments scams that purport to offer investors the opportunity to buy “pre-IPO” shares of companies continue to be prevalent. SEC staff continue to receive complaints—and to bring enforcement actions—involving these types of scams, which may be promoted on social media and websites, by phone, by email, in person, or through other means.  To learn more about how to identify and avoid pre-IPO scams, go here.

3. Be Wary of AI Promises

With artificial intelligence (AI) in the news, individual investors should know that bad actors are using the growing popularity and complexity of AI to lure victims into scams.  There are unregistered and unlicensed online investment platforms that are promoting AI trading systems and making unrealistic claims.  In reality, these scammers are running investment schemes that seek to leverage the popularity of AI.  Companies may seek to capture your interest by claiming they are leaders in developing or using this emerging AI technology.  Companies might make questionable claims about how AI will affect their business operations and drive profitability.  While rapid technological change can create investment opportunities, bad actors often use the hype around new technological developments to lure investors into schemes.  You can learn more here.

4. New T+1 Settlement Cycle – What You Need to Know

The SEC recently shortened the standard settlement cycle for securities transactions from T+2 to T+1, subject to certain exceptions.  Since 2017, the settlement cycle had been T+2.  To learn more about how the new T+1 settlement cycle will affect the transactions you place with your brokerage firm, go here. 

5. Be an Informed Investor

Federal securities laws require companies and investment funds to provide information to investors about the state of their business and/or investments, as applicable.  Much of this information can be found on the SEC’s EDGAR website.  Companies file quarterly and annual disclosure about their business and performance on Forms 10-Q and 10-K.  To learn more about how to read these disclosures, go here.  Investment funds, such as mutual funds and ETFs, deliver reports to their shareholders twice a year.  To learn more about how to read these reports, go here.

6. Always Check Your Investment Professional

Always check the background of an investment professional.  It is easy and free, and it could save you money and heartache in the long run.  You can find details of an investment professional’s background, qualifications, and disciplinary history through the search tool on the SEC’s website for individual investors, Investor.gov.  If you have any questions about checking the background of an investment professional, you can call our toll-free investor assistance line at (800) 732-0330 for help.

7. Understand How Expenses Can Affect Your Returns

It can be costly to ignore fees associated with buying, owning, and selling an investment product.  Expenses vary from product to product, and even small differences in costs can mean large differences in earnings over time.  An investment with high costs must perform better than a low-cost investment to generate the same returns.  Read here to learn more. 

8. Diversify Your Investments

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.  Most 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.

9. Understand How Behavior Can Affect Investment Performance

Did you know that active trading and some other very common investing behaviors can 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.

10. Take Caution on Social Media

Investors are increasingly turning to social media for information about investing.  Social media platforms allow almost anyone—from expert investment professionals to social media influencers with limited investment experience—to easily share information about investments with a large number of people.  You should exercise caution before following any investment advice from a social media source.  While social media can provide many benefits for investors, it also presents opportunities for fraudsters to contact many different people at a relatively low cost to try and ensnare individuals in various fraudulent schemes, such as impersonation schemes, market manipulation schemes, and relationship investment scams.

Additional Information

Report possible securities fraud to the SEC. Ask a question or report a problem concerning your investments, your investment account or a financial professional.

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