Five Tips for Investors in 2012

Out with the old and in with the new. For many investors, 2011 was a year of lessons learned as a number of financial products crashed and burned. Included in this list are various non-traded real estate investment trusts, leveraged and inverse exchange-traded funds, and private placements.

The beginning of a new year is a good time for investors to take stock of their investments. Here are five tips from the Securities and Exchange Commission (SEC):

Tip 1: Do your homework. That includes checking the background of the financial professional handling your money. Many investors do not know that you can check the background of a broker or investment adviser. It’s free and easy – and a key step for avoiding investment fraud. Go to the Financial Industry Regulatory Authority’s Broker Check Web site to begin the process.

Tip 2:  Be aware of any fees that you pay to buy, own, and sell your investments. Investment costs shouldn’t take you by surprise. Fees and expenses vary from product to product and can take a huge bite out of your returns. Small differences in investment costs can translate into large differences in returns over time.

Tip 3: Don’t put all your eggs in one basket. Think twice before investing heavily in any individual investment or a single asset class.

Tip 4: Research investments before handing over your money. Smart investors always check whether an investment is registered with the SEC by using the SEC’s EDGAR database or contacting the SEC’s toll-free investor assistance line at (800) 732-0330.

Tip 5: If it sounds too good to be true, it probably is. Steer clear of any investment that comes with so-called guaranteed returns. Promises of high returns, with little or no risk, are classic warning signs for fraud.