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Guiding Principles

Used with permission from The United States Securities and Exchange Commission.

Guiding Principles

The SEC cannot tell you what investments to make, but we can offer unbiased information about investing. Here are some guiding principles to put you on a path to saving and investing.

Make a Plan

The key to financial security is to have a financial plan. You'll first need to figure out where you're starting from – for example, how much you owe and how much money have you saved. Then set your goals. Do you want a car, a college education for your children, or a comfortable retirement? Once you know what you want, when you want it, and how much it costs, you can figure out how much you’ll need to save.

Save and Invest for the Long Term

Perhaps the best protection against risk is time. On any given day the stock market can go up or down. Sometimes a market downturn can last for months or more. But over the years, investors who adopt a "buy and hold" approach to investing tend to come out ahead of those who try to time the market.

Investigate Before You Invest

Another way to reduce risk is to do your homework before you part with your money.

  • Call your state securities regulator to check up on the background of any person or company that you're considering doing business with.
  • Find out as much as you can about any company before you invest in it. Companies that issue stock have to give important information to investors in a document called a "prospectus" and by law that information is supposed to be truthful. Always read the prospectus.
  • Beware of "get rich quick schemes." If someone offers you an especially high rate of return on an investment or pressures you to invest before you've had time to investigate, it's probably a scam.

Avoid the Costs of Delay

Time can be one of the most important factors determining how much your money will grow. If you saved $5 a week at 8% interest starting from the time you were 18 years old, by age 65, your savings would total $134,000. If you wait until you are 40 years old, you'll have to save $32 a week to have $134,000 at age 65. In fact, just one year's delay – waiting until you're 19 years old to start saving $5 a week at 8% interest – will cost you more than $10,000 by the time you're 65.