Texas Investor Guide

Featuring New Information

For Investors

Texas Investor Guide

Strategies for Investing Wisely and Avoiding Financial Fraud

A Publication of the Texas State Securities Board

Regulating the securities industry and protecting investors since 1957

Dear Texas Investor:

You have in your hands a valuable resource that can help you become a more informed investor and guard against the devastating effects of financial fraud.

This newly revised edition of the Texas Investor Guide describes the time-tested lessons for achieving financial goals. Like most investors, affording a comfortable retirement is undoubtedly near the top of your list.

The Investor Guide complements the regulatory duties the Texas State Securities Board performs in protecting investors.

The Agency regulates firms and individuals selling securities or providing investment advice to Texans. We conduct compliance examinations across the state to make sure firms are operating in accordance with securities laws and regulations. If they aren't, we can bring administrative actions in the forms of cease-and-desist orders, suspensions, and fines.

The Agency's enforcement division prosecutes investment fraud cases in dozens of Texas counties, winning stiff criminal sentences and orders of restitution to investors. Our staff regularly coordinates with federal and state authorities in criminal matters.

The best defense against investment fraud, however, is self-defense. The Investor Guide will help you on the path to financial well-being.

Sincerely,

Travis J. Iles Securities Commissioner

Texas Investor Guide

Strategies for Investing Wisely and Avoiding Financial Fraud

Texas State Securities Board

2018 Edition

TEXAS INVESTOR GUIDE

PART 1 PART 2

PART 3

TABLE OF CONTENTS

INTRODUCTION

Facing Page 1

WHY INVEST? Before Investing, Develop a Plan for Family Money Management The Time Value of Money The Rule of 72 Investing for Growth Why People Don't Invest

Page 1 Page 1 Page 2 Page 2 Page 3 Page 4

MAKING INVESTMENTS Asset Classes

Equities Fixed Income Cash and Its Cousins Real Estate Investing Through Mutual Funds and ETFs Mutual Funds Exchange Traded Funds Actively Managed vs. Index Funds Establishing an Account

Page 5 Page 5 Page 5 Page 6 Page 7 Page 8 Page 9 Page 9 Page 10 Page 11 Page 13

PRINCIPLES OF INVESTING Investment Risk Strategies to Manage Risk

Asset Allocation Diversification Reallocating and Rebalancing Portfolio Examples Target Date Funds The Impact of Fees

Page 14 Page 15 Page 16 Page 16 Page 17 Page 18 Page 19 Page 24 Page 25

TEXAS INVESTOR GUIDE

PART 4 PART 5 PART 6

INVESTING FOR A SECURE RETIREMENT Retirement Accounts Pension Plans Social Security Annuities 401(k) Plans IRAs

Traditional IRA Roth IRA Employer Plan or IRA Cash-Outs and Rollovers

AVOIDING SCAMS AND UNDERSTANDING HIGH-RISK INVESTMENTS The Warning Signs of Fraud Dealing with Registered Brokers and Advisers Beware of Pundits When You Suspect Fraud Top Threats to Investors Spendthrifts Texas Case Studies of Investment Fraud

FINDING A FINANCIAL PROFESSIONAL YOU CAN TRUST Investment Advisers Brokers Robo-Advisers Financial Planners Alphabet Soup of Designations Questions to Ask

TEXAS STATE SECURITIES BOARD Recommended Resources and Reading

GLOSSARY OF TERMS

Page 27 Page 28 Page 29 Page 29 Page 29 Page 30 Page 31 Page 32 Page 32 Page 33 Page 34

Page 35 Page 35 Page 36 Page 37 Page 37 Page 38 Page 42 Page 42

Page 46 Page 46 Page 47 Page 49 Page 50 Page 50 Page 52

Page 54 Page 55

Page 57

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In order to avoid copyright disputes, this page is only a partial summary.

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