It never hurts to seek out investing advice. Even the most experienced investors get investment advice, either from a single investment adviser or a trusted group. The key term here is trusted. If you’re considering opening an investment advisory account, it’s important to choose the right one.

Choosing the Right Investment Adviser

An investment adviser should serve as a trusted sounding board providing investment advice that is most in-line with your investment goals and strategy. As such, it’s important to go over these objectives with your potential adviser; don’t be afraid to ask questions. You should never be intimidated or feel pressured by an adviser or advisory firm. When choosing an investment advisor, be up front about your needs. Here are some common things you should address when considering any investment advisory account:

• Communicate your investment goals:
  • Set investment timelines
  • Discuss limits and risk tolerance
• Set service expectations
• Discuss associated costs and fees

These are just some of the fundamental things you should cover with any potential investment adviser. You should always come prepared with questions of your own that are tailored to your specific investment goals. After you have found an adviser you feel you can trust, make sure you understand your advisory contract. Although an adviser or firm may be the right fit for your investment needs, advisory contracts can be complex; outlining costs and fees for service, communication between you and your adviser and other terms and conditions. Before signing an agreement, make sure you go over any questions you have with your investment adviser. Common things to look for and consider are:

• Level of service
• Fee breakdowns and calculations
• Your responsibilities as an investor
• The responsibilities of your adviser
• How to communicate with your adviser
• Contract cancellation procedures

Investor Resources

These are just some easy tips to help you choose the right investment adviser. For even more helpful advice check out this SEC bulletin.

403(b)

This investment plan option is typically available to employees of public education institutions, non-profits and religious organizations. It is what’s known as a tax-sheltered annuity (TSA) plan. Think of it as the non-profit version of a 401(k). With a 403(b), you can defer parts of your earnings to the designated annuity plan. Your employer may also offer options in which they contribute to it as well.

457(b)

This option is typically available to employees of state and local government agencies and non-profits. This type of plan is known as a deferred compensation plan. It allows you to put-off paying taxes on contributions to retirement savings until later years. Earnings made on retirement savings are also deferred.

Rules and Limits

With both retirement investing plans, there are rules and limits as to who is eligible, what plans are available to you, and how much can be contributed.

• Currently, both plans have contribution limits set at $18,000. However, this is subject to change year-to-year.
• Typically, employers select which plans you can choose from. They are usually a limited offering.

What You Need to Know about Retirement Investing

You need to choose a vendor and plan that suits your retirement investing goals. It’s also important to note that just because a plan is offered through your employer, it does not mean that the vendor has been vetted or endorsed by your employer. Before selecting any plan, make sure you research the vendors’ background and experience.

Resources

If you want to learn more about these retirement investing alternatives, read the SEC bulletin. If you want to learn more about protecting your investments, check out our blog for even more investing tips.

Common Buy-and-Sell Order Types

Market Order

Market orders are orders to buy or sell a stock at the best available price, i.e. market price. While market orders are typically executed immediately, it’s important to know that the price something last traded at is not necessarily the price you will get.

Limit Order

A limit order requires that a stock be bought or sold at a specific price or better.

• Buy limit orders can only be executed if the order is at limit price or lower
• Sell limit orders can only be executed if the order is at limit price or higher

It’s important to note that limit order may not always be executed. They depend on the market price reaching the set limit price.

Stop Order

Stop orders, also called stop-loss orders are orders to buy or sell when a stock reaches a specified value. When that value is reached, the order then acts as a regular market order.

• Buy stop orders are entered at prices above current market prices
• Sell stop orders are entered at prices below current market prices

Investor Resources

These represent only the three most common order types available. You can also combine order types to further suit your investing needs. To learn more about different order types and more on these common order types, read the full SEC bulletin. Check out our archives for even more news and tips!

Diversified portfolio or salad bar portfolio?

While novice investors are typically more prone to this mistake, even long-term investors can have this problem. Typically, this comes about due to lack of planning. You can’t just start building a diversified portfolio by grabbing anything that comes along. If you just start picking from all over the place, just piling on investments, that is the quickest route to making your portfolio a mess. In a recent article, Forbes refers to this as a “salad bar” portfolio.

What’s a salad bar portfolio?

You’ve probably seen (or maybe you’ve been) one of those the people going down the line at a salad bar, just piling on anything that looks good at the moment. By the time you leave the bar, your plate is loaded down with all sorts of bits and pieces. When its finally all heaped on the plate, then you realize you have way to much of everything and not enough of the stuff that matters. This is where the salad bar portfolio gets its name.

How to build a true diversified portfolio

In the article, Forbes offers up three tips for those seeking to build a true diversified portfolio:

• Make value-oriented, efficient investments
• Don’t invest based on short term gains
• Look at the big picture of a company before investing in it

We offer up an additional bit of advice if you’re investing with the help of a financial advisor. While a financial advisor can provide key insight and guidance in your investing, it’s important to remember that your are in charge of your investments. Some financial advisors or even broker-dealers are incentivized to encourage investments that will get them greater returns, not you. We encourage investors wanting to build a strong, diversified portfolio to set a a practical investment strategy and follow it.

Investor Resources

Read the full Forbes article to learn more about the risks of your diversified portfolio becoming a salad bar portfolio. If you believe you were misled in an investment by a financial advisor or broker-dealer, you may be entitled to investment-loss recovery.

What are bad actors?

FINRA defines a bad actor as one within the financial industry “who seeks to evade regulatory requirements and harm investors for their own personal gain”. Essentially, they’re con artists; fraudsters. I’m sure you’re familiar with that old adage about a few bad apples, right? Well, that’s exactly what Financial industry regulators have to say about bad actors. In his statement, FINRA President & CEO, Robert Cook spoke about the danger that bad actors pose to the overall stability in the industry as a whole. Bad actors have the capacity to ruin investor confidence in their broker-dealer and mar the reputation of the entire industry through their actions.

Spotting the bad apples

If you’re involved in the financial industry as an investor, it’s important to be able to spot bad actors. FINRA has comprehensive preventative measures in place to seed-out bad apples but every once in a while, some are bound to slip through the cracks. Here’s some things you should know before doing any business with a new broker-dealer.

License & Registration

No matter what security you’re investing in, make sure your broker-dealer is properly licensed and registered. This means they must be not only a licensed broker, but licensed to do the specific function they are offering to you. The broker must also registered with a licensed brokerage firm.

Account Monitoring

It is especially import to review your monthly account statements. Even if you are a passive investor who prefers to let your broker-dealer make investments as they see fit, you need to monitor your account activity and statements. Watch out for any unusual investments involving large sums, or irregular movement and contact your broker-dealer if you see anything unusual.

Aggressive Solicitation Practices

Aggressive or unwarranted solicitation of services or information should be an immediate red-flag. If you have been receiving repeated calls, emails or requests for correspondence from an individual claiming to be a broker-dealer associated with your account, you need to verify they’re identity.

Investor Resources

FINRA offers comprehensive investor support and resources. Click here if you want to learn more about filing a complaint or other services Contact our investment loss recovery attorneys if you believe you or a family member has been affected by bad actors.