Office of State Treasurer Denise L. Nappier

     Investing Your Money    

Every day, more people are investing their money.  Some make tens of thousands of dollars, but many lose their life savings by making bad decisions.  In today's volatile stock market, stock trading is especially risky, and there are other important concepts to understand when making investment decisions. Additionally, there are places to turn for information about how to invest with care, and ways to look into the background of those that would offer investment advice.

     Basic Investment Advice    

Here are some suggestions on how to be a smart consumer:

• Start small.  There is no sense in throwing all your money in one stock early in life.  Rather than looking for fast money, try to make small gains.  When you get a little more experience, move up to higher profile stock or mutual funds.  Consider carefully consulting with professionals, and seek more than one opinion.

• Diversify.  That is, spread your money out.  Try not to put all your money in one market.  If, for example, the technology sector takes big losses, you will be protected by having some money in another sector, such as retail or manufacturing.

• Understand mutual funds.  Most mutual funds are supposed to generate growth over time and thus are geared toward long-term investors, not day traders.

• Information is power.  You can never have too much information about a company that you are interested in.  If you invest in a company but don't know what they're doing, you could lose a major part of your investment.  Some Internet sites and online brokers have research available for you; you can also check out the company's website.

• Don't forget about commissions.  The fees that you pay to your broker can eat up a significant portion of your returns.

Source: Investing Online Resource Center

     Investment Advisers:  What You Need to Know Before Choosing One    

Among other agencies of the federal and state governments, the United States Securities and Exchange Commission (SEC) receives many questions about investment advisers — what they are and how to go about choosing one. The SEC has prepared a series of answers some of the typical questions they receive from investors about investment advisers. This Q&A, developed by the SEC, is for the benefit of investors. (You should not rely upon it to determine if you need to register as an investment adviser.)

http://www.sec.gov/investor/pubs/invadvisers.htm

     Protect Your Money:  Research Brokers and Advisers    

Federal or state securities laws require brokers, advisers, and their firms to be licensed or registered, and to make important information public. But it's up to you to find that information and use it to protect your investment dollars. The good news is that this information is easy to get, and one phone call or web search may save you from sending your money to a con artist, a bad broker, or disreputable firm. Use the link below to help.

http://www.sec.gov/investor/brokers.htm

     Terms to Know    

Certificate of Deposit  

A low-risk investment you make at a bank for a fixed period of time.  Interest is much higher than a passbook savings account, but you will be penalized if you withdraw your money before the term of the deposit is completed.

Stock
A share of ownership in a corporation.

Dividend
A share of a company's profits paid to those who hold stock in that company.

Bond
A loan made by an investor to the government or to a corporation, which is paid back with interest at a fixed time.  Bonds are generally lower risk investments than stocks.

Mutual funds
A portfolio of stocks, bonds, cash, and other investments.  These investments are bought and sold by a professional manager, so the risk is generally lower than that of an individual stock.  In addition, mutual funds are categorized according to how risky they are and how quickly they grow.

Broker
A professional who buys and sells stocks for you.

Commission
The amount of money you pay to a broker to carry out a transaction.

Day-trading
The risky and difficult practice of buying and selling stock constantly on the basis of small, short-term gains and losses.

     Additional Information    

You may wish to review additional information about investment your money and related financial topics.
http://www.state.ct.us/ott/financialeducationresources.htm