Protect your investment dollars Published June 29, 2007 By Debora Whipple N.J. Bureau of Securities, Office of the Attorney General MCGUIRE AIR FORCE BASE, N.J. -- It's time to take the initiative and learn about investing for yourself, and then to use what you have learned to invest and protect your investment dollars. As much as we, the working masses, would like to put "blame" on employers for putting us in charge of our own investments, it's really not such a bad thing. It might amaze some at just how savvy others have become in learning about investments and about succeeding. The person with the moderate income is learning what only big-time investors knew. They are reading all they can and have learned to ask questions and ask for documentation. That is a right of any investor. Smart investors don't chance losing their money before they actually invest. What they do first is call the state securities regulator to ask if the investment and the agent are registered. Investors need to become familiar with securities terms, the types of investments and the concept of diversification. Diversification involves investing your money in several different places to reduce the level of risk from having too many of "your eggs in one basket." Also, learn how to avoid being scammed into an investment that appears to be safe, but is not. Some basic investment plans, such as the 401(k) and 403(b) plans, are offered through employers. These plans are good for retirement savings, and you don't have to seek out an agent on your own or make what are sometimes difficult decisions, as you might have to if you did this on your own. The catch to an investing plan is sticking to it -- these plans involve deductions from your paycheck. If you are in the military, the government has been clever enough to come up with plans such as the Thrift Savings Plan. The TSP can provide a solid guaranteed return on the investment, since it is essentially a 401(k) for federal employees and it's payroll deducted. Those in the military might want to strongly consider this plan as a first option. For federal civilian employees, it does have matching funds. For those on active duty, they're currently not matching funds. One of the best benefits is it is tax-deferred -- this means what you contribute to this plan lowers your taxable income. So, if you make $40,000 and contribute $5,000, then you only report $35,000 to the IRS. The TSP is a built-in retirement plan that travels with you if you choose to leave the military. You have the options to leave your money in the TSP where it will continue to earn interest. The TSP can also be taken out and transferred into another plan with your new employer. For more detailed information, contact your family support center and they can provide literature and applications on the TSP for your consideration. Some points to remember, even if you are not new to the investing world, are: Know that a good securities broker, broker-dealer or financial advisor will answer your questions and won't intimidate you by making your question seem "dumb" or inconsequential. If they do, you might want to find another agent. Keep notes and dates of any questions and answers that are discussed, you might find these to be of great assistance if you have a problem or dispute at a later time. Consider if the investments discussed match your goals, your timeline and your needs. If you expect to pay for college with an investment, then consider the time involved for the investment to accrue enough to be of benefit and any costs, fees or penalties accompanied with taking the money out early. Get the facts about fees -- fees to purchase, fees to sell -- and ask how easy it will be if you want to sell the investment (that is referred to as how "liquid" the investment is). Ask if there are fees simply to maintain your accounts and ask when taxes are paid. Get documentation about the investment -- or the company -- such as how long has it been around. Is it making money, what is the risk? If you are told an investment is "risk-free" or "guaranteed," watch out! Securities regulators will tell you there is no such thing as a risk-free or guaranteed investment and that these are trigger words for a potential fraud. Get a prospectus and learn how to read it. If you have trouble understanding it, you can go to your state regulator for information. Remember, ask, ask, ask and get answers. Then take your time in making a decision. Do not let anyone pressure you into a sale or purchase. When investing, don't write a check out to an individual. The check should be made out to a brokerage, a mutual fund, or a bank or similar financial institution Finally -- don't respond to unsolicited phone calls, e-mails or faxes from someone you don't know. If you do, that could be the first step you take toward becoming a securities fraud victim. Any and all state securities regulators will warn investors about securities fraud and will tell you to first make sure the investment product, the agent and the firm are registered with the state securities regulator, if they are required. Ask for a CRD report that provides background history that you will want to know about the person selling the investments. This is vitally important. Securities fraud cases have involved frauds where investors have been asked to liquidate holdings and safe investment plans in order to invest in something being offered -- touted -- as having a higher return on investment. The scam artist could also be asking you, the investor, to invest in something that does not exist, but looks or sounds really good. Check it out! Call the state securities regulator to see if the investment is registered and get a CRD report on the firm or agent selling the investment. Also, according to the Ledger- Enquirer.com from Columbus, Ga., two companies are under investigation by federal and state authorities for possibly targeting soldiers and others in the southeast region with an investment scheme. Allegedly, Capital Consortium Group Inc. and 3 Hebrew Boys L.L.C. had been operating on post or in the local community and had enticed Fort Benning soldiers to invest in the company. They conducted seminars and promised that, upon investing or paying a fee, investors would be "guaranteed" 10 percent monthly interest or have other debts paid by the companies. According to South Carolina officials, the promoters allegedly have never invested in foreign exchange markets and rarely make more than a few of the promised payments to investors. Contact the New Jersey Bureau of Securities toll-free at 1-866-I-Invest for a CRD report. E-mail questions to askbureauofsecurities@lps.state.nj.us and visit the Web site www.njsecurities.gov for more information. Investment booklets are downloadable from the site.