Investing Basics: Your First Line of Defense

Know Your Surroundings, Get Educated

The best way to invest wisely and avoid falling prey to investment fraud is to get informed. Understanding the risks, researching your financial professional and not being rushed into an investment decision are essential basics to put in your investing rucksack.

• Understanding the risks: There is no such thing as a guaranteed investment and if someone is telling you they have one available, it is most likely too good to be true. Know the risks associated with investing your money and don’t be afraid to ask questions of your financial adviser.
• Research your financial adviser: Advisers and broker-dealers are required to register in order to sell securities. A free and easy way to find out if your investment professional is registered is to use the SEC’s Investment Adviser Public Disclosure database. If your investment professional is not registered, they cannot sell securities and this should be a red flag. Even better, this database is mobile friendly. Meeting your adviser for the first time? Search his or her name on your mobile device while you wait for your appointment.
• Don’t be rushed: A fleeting opportunity may be just that. And it might be a scam. Don’t feel pressured by investment offers touting tight timelines or to “Buy right now!” This can be a sign of an investment fraud.

Look Ahead to Retirement

Did you know that you have an investing tool already at your fingertips? The Thrift Savings Plan is a retirement savings plan for federal employees, and since 2000 it has been open to military personnel. The TSP is a defined contribution plan, similar to the 401(k) plans that many private companies offer their employees. As with any defined contribution plan, the income you receive from your TSP account will depend on how much you put into the account and the earnings on your investments.

Once you have decided to leave the military there are many things to consider, including what you will do next. Your TSP savings have some tax consequences that are unique to you as a service member. If you have contributions that are subject to the combat zone tax exclusion, there are restrictions on the types of retirement plans they can be rolled over into. Visit the TSP website for more information.

Four out of ten people cash out their retirement savings when changing jobs. While it may not seem as though you have saved very much money, it can be very hard to save the same amount once you spend it. By cashing out, you may be subject to a tax penalty. You also miss out on the power of compound interest, which works for you when you have a sum of money already saved.

Need more intel?

• Attend investor education events available through advocates such as the SEC’s Office of Investor Education and Advocacy, and its eleven regional offices throughout the country. The SEC participates in programs and initiatives aimed at helping members of the military invest wisely and avoid fraud. Interested in hosting one of these events? Contact us.
• The SEC is a charter member of the U.S. Department of Defense’s Financial Readiness Campaign, and regularly assists in the presentation of financial education programs to the military.
• SEC staff regularly participates in the Military Saves Week financial fair held each year at the Pentagon. If you are in the building and have questions, stop by and ask us!