Sound investment education from regulators
If you read this column with any regularity, you have an interest in sound investing, rather than in getting tips on a stock to buy or how to get rich quickly (correct me if I’m wrong in my assumption).
To that end, there are resources that I share, such as those created by financial industry regulators like the U.S. Securities and Exchange Commission. The SEC has an interest in educating investors, utilizing its resources to “empower Main Street investors to take control of their financial future.” That goal resonates with me as a proponent of financial literacy education.
As SEC Chairman Jay Clayton said in a release: “Main Street investors around the country have consistently told me two things: one, that they wish they were better informed about investing, and two, they wish they had started investing earlier. Asking the right questions of yourself and of those who provide financial services is key to getting started and staying on the right track.”
If I look to my own experiences with members of the public, 401(k) participants and my clients, I can tell you that something (or someone) has to trigger a desire to learn about financial security. While that’s normally a matter of chance, it does not have to be.
Anyone of any background can start the learning process with resources as strong and as basic as those provided by the SEC on its website Investor.gov. More than 12 million users have accessed the website since it was launched in 2009.
You’ll find an introduction to investing, with easily understandable explanations of different investment products such as mutual funds, ETFs, certificates of deposit, annuities and hedge funds.
There you can learn about how the stock market works, what the SEC does, and you’ll be able to follow a road map to saving and investing. The latter could be most helpful. The road map helps you define your goals, figure out your finances, create a plan to pay off debts and save for a rainy day, understand what it means to invest and to diversify your investments, gauge your risk tolerance and learn about investment options.
When it comes to risk, which I believe is the most important thing to understand in becoming a wise investor, the website offers this example:
“(I)f you are saving for retirement, and you have 35 years before you retire, you may want to consider riskier investment products, knowing that if you stick to only the ‘savings’ products or to less risky investment products, your money will grow too slowly. Or, given inflation and taxes, you may lose the purchasing power of your money.”
Another important point: “A frequent mistake people make is putting money they will not need for a very long time in investments that pay a low amount of interest.”
That point of view is coming from the regulators, not from salespeople. They make this distinction: “On the other hand, if you are saving for a short-term goal, five years or less, you don’t want to choose risky investments, because when it’s time to sell, you may have to take a loss.”
Again, I like the idea of regulator education. It’s unbiased and sound, and definitely a good place to start and return to over time. And it’s an easy way to get young people started, especially through the video selection here: investor.gov/additional-resources/specialized-resources/public-service-campaign.
As Lori Schock, director of the SEC’s Office of Investor Education and Advocacy, said in the release, “Starting early and creating a financial plan is the best way to secure your financial future.”
Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford) and author, welcomes your questions/comments (email@example.com). Her awards include the 2018 Clarion Award, symbolizing excellence in clear, concise communications. Her latest book, a curated collection of Julie’s columns, is “Retire Securely: Insights on Money Management From an Award-Winning Financial Columnist.” To hear Julie speak, visit juliejason.com/events.