Some Basic Investment Questions


If your investor is worth his salt, he or she should be able to navigate today's choppy financial seas. If you've tossed yours overboard, then it's important to ask these key questions of your new advisor before you hand over any money.

After the global financial crisis hit the stock market, many investors find themselves talking to an investment professional who they hope will be able to help them navigate the choppy financial seas. In that case, according to the Securities and Exchange Commission, it’s important to do research your broker or advisor and to ask some key questions before you hand over any money.

Start by checking the broker’s background, either with the Financial Industry Regulatory Authority or with your state securities regulator. You can get information on your state securities regulator from the North American Association of Securities Regulators.

If you plan to use an investment advisor as opposed to a broker, you can check their background either through your state securities regulator or through the SEC’s Investment Advisor Public Disclosure Web page.

Don’t agree to any investment, advises the SEC, until you know the answers to questions like whether the investment suits your financial goals:

  1. Know what the risks of the investment are and the impact that changes in the overall financial picture, like rising interest rates or falling property values, would have on it.
  2. Ask whether it’s a liquid investment that would let you get your money out quickly if you needed it.
  3. Asking about fees is another must.
  4. You should be aware of any upfront fees you’ll pay to invest and what ongoing fees you’ll pay as long as you hold the investment.
  5. Lastly, it’s OK to ask how the broker or advisor will be paid — whether he/she will get a commission for selling the investment product.

For a more extensive list of questions, visit the SEC Web page.

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