Deciding to Invest with a Broker


Making the Right Investment Decision

Never invest in a product that you don't fully understand. Consult information sources such as business and financial publications. Information regarding the fundamentals of investing and basic financial terminology can be found at your local library.

Ask your sales representative for the prospectus, offering circular, or most recent annual report – and the "Options Disclosure Document" if you are investing in options. Read them. If you have questions, talk with your sales representative before investing.

You also may want to check with another brokerage firm, an accountant, or a trusted business adviser to get a second opinion about a particular investment you are considering.

Keep good records of all information you receive, copies of forms you sign, and conversations you have with your sales representative.

Nobody invests to lose money. However, investments always entail some degree of risk. Be aware that:

   1. The higher the expected rate of return, the greater the risk; depending on market developments, you could lose some or all of your initial investment. With some investments, such as options, you can lose more than the amount of your investment. Ask whether the security can be redeemed or if there is a market for it.

   2. Some investments cannot easily be sold or converted to cash. Check to see if there is any penalty or charge if you must sell an investment quickly or before its maturity date.

   3. Investments in securities issued by a company with little or no operating history or published information may involve greater risk.

   4. Securities investments, including mutual funds, are NOT federally insured against a loss in market value.

   5. Securities you own may be subject to tender offers, mergers, reorganizations, or third party actions that can affect the value of your ownership interest. Pay careful attention to public announcements and information sent to you about such transactions. They involve complex investment decisions. Be sure you fully understand the terms of any offer to exchange or sell your shares before you act. In some cases, such as partial or two-tier tender offers, failure to act can have detrimental effects on your investment.

   6. The past success of a particular investment is no guarantee of future performance.