BE CAREFUL WHERE YOU GET YOUR INVESTMENT ADVICE•••

When it comes to money, it seems like everyone has his or her own best
interest at heart. All you have to do is look at a couple of high
profile cases like the Bernie Madoff and Allen Stanford scandals, two
different hedge fund managers accused of running billion dollar ponzi
schemes, to be aware of the risks involved when trusting others with
your money. You should be guarded when taking the financial advice of
others, whether they are professional investment advisers, the office
day trader, or a well-meaning family member.
However, not all brokers, investment advisers, and hedge fund managers
are out to get your money. There are thousands of honorable investment
advisers who will do their best to make your money grow. After all,
their success is often tied to yours. As with all investments, you
should always do your own research before committing your hard earned
dollars. Here are a few examples of when it pays to research before
acting.

•Don't rely on insider tips to make investment decisions. The first
thing to be aware of is that insider trading is illegal. Before acting
on any investment tip that someone claims to be insider information,
ask yourself if it is really insider information, and if it is legal
to take action. If the information is publicly available anywhere, you
don't have any advantages over the general population. There are
hundreds of thousands of investors who have access to the same
information you do. Always research the fundamentals before pulling
the trigger on any trades.


•Be aware of scams and agendas
Where is the information coming from? If it is from an unsolicited
e-mail, then delete it immediately, mark it as spam, and move on with
your life. Pump and dump scams, penny stocks schemes, and similar
scams are common and should be avoided at all costs. Also aim to find
out the advice giver's agenda. Is the person trying to sell you an
investment? Do you already have a business relationship with him or
her? Is he or she trying to give you an up-sell or generate new
business? Before investing, find out as much information as you can
about the investment, the individual, and any potential conflicts of
interest they may have. It may surprise you to learn that brokers do
not have a fiduciary duty to you, and they may recommend investments
that give them a larger commission. This is why it is essential to
interview your investment adviser before hiring him or her.

•Be cautious of advice from the office day trader.
Every office (and family) has one or two well-meaning individuals who
love to share their enthusiasm for investing. You can often identify
them as someone who always has hot investment tips, brags about how
much money they made on their latest trade, or talks about losses they
avoided on a recent market downturn. While the office day trader means
well, it's impossible for someone else to know how well or how bad
they are actually doing, since it's easy to only talk about the wins
and avoid talking about the losses. My general rule of thumb is to
avoid making any investment decisions based on the advice of
acquaintances or family members. I always do my own research first.
It's better for friendships, and better for your portfolio.

•Remember, there are no guarantees.
No matter where you get your investment advice, there are no guarantees.
That is why it is imperative that you do your own research before
acting on the investment advice of others. At a minimum, you should
make sure you understand the risks involved with any potential
investment, and make sure the investment fits in with your risk
tolerance and <investment/b> goals.