PDF Texas Investor Guide

NEWLY REVISED

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:

Welcome to the Texas Investor Guide: Strategies for Investing Wisely and Avoiding Financial Fraud, from the Texas State Securities Board.

The State Securities Board registers securities offered or sold in Texas and oversees the firms and individuals selling securities or providing investment advice to Texans. The Agency also enforces the Securities Act through criminal, civil, and administrative actions.

Just as important, the Agency helps our fellow Texans become better informed investors through our Investor Education initiative.

This newly revised edition of the Investor Guide describes the time-tested lessons for achieving financial goals, including affording a comfortable retirement, and provides important information to help guard against the devastating effects of investment fraud.

I hope you will find the Investor Guide to be a valuable resource in planning for and achieving your financial goals.

Sincerely,

John Morgan Securities Commissioner

Texas Investor Guide

Strategies for Investing Wisely and Avoiding Financial Fraud

Texas State Securities Board

2017 Edition

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 5 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 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 49 Page 51

Page 53 Page 54

Page 56

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

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