GALLOWAY TOWNSHIP — The Dow Jones Industrial Average is about 13,000 and stock market rallies have brought new confidence to Wall Street.
But investors should always be cautious.
“Just because you have disposable income doesn’t mean you should throw it at any opportunity that presents itself,” said David White, director of the Investor Advocacy Project at Seton Hall University’s School of Law. “As the old saying goes, investing without research is mere gambling.”
“The stock market for decades has been a fantastic place to make investments, and there’s every reason to believe it will continue to do so for those judicious enough to do the research and invest with confidence,” he said.
Smart investing is about more than putting money in the hands of a broker; investors should keep detailed records, said Nima Ashtyani, a third-year law student at Seton Hall and president of the Dispute Resolution Society.
“You should know where every dollar, every quarter, every penny is going at all times,” he said “And you should understand why your money’s doing what it’s doing.”
Ashtyani and White spoke Thursday at the Richard Stockton College of New Jersey for a seminar on sound investment practices.
The advice centered on common sense approaches to investment, as well as to help avoid being defrauded by brokers or others and to be able to catch such activity.
Ashtyani said potential investors should get control of their finances before they invest by creating a budget, setting investment goals, paying off high-interest debt such as credit cards, and establish an emergency fund for the future.
Before picking an investment professional, people should ask questions, talk to relatives and friends, and possibly use Internet searches to check their professional backgrounds, he said.
Ashtyani said investors should be vigilant — reading, understanding and maintaining their account statements.
Pushy brokers, account discrepancies and guaranteed returns should all raise red flags, he said. Even bonds, which are considered lower risk investments, carry some risk.
“There are no guarantees in investment,” he said.
Repeating a favorite phrase from billionaire investor Warren Buffett, Ashtyani said, “If you don’t understand a company’s product or how it makes money, avoid it.”
Seton Hall’s Investor Advocacy Project is funded by a grant from the Financial Industry Regulatory Authority Investor Education Foundation, which promotes responsible investing and represents those who sustained monetary losses through broker fraud or negligence.
In the securities industry, there’s a commonly recognized acronym — S.C.U.M., which represents the four most commonly asserted causes of action in securities arbitration, White said.
- Suitability: Does a broker’s investment match your risk tolerance?
- Churning: Does a broker make many trades on your account just to rack up fees?
- Unauthorized trading: Does a broker buy and sell securities without a customer’s consent?
- Misrepresentation: When facts are omitted or misstated.
“It’s common sense,” White said of the acronym. “If you want one thing to take from this … that’s an easy one to take away.”
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