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Are you letting your guard down about money?

- Alan Lavine and Gail Liberman

Is your investment strategy to blindly follow your financial adviser's advice on which mutual funds to buy?

If so, you're not alone. We've seen lots of published incidents in which innocent investors have been hoodwinked into buying inappropriate mutual funds.

It's critical that you treat anyone handling your money the same way you'd treat a job applicant at your very own company. Plus, it's a good idea to do a certain amount of your own homework.

Here are some important rules:

  • Never invest in anything you don't understand. If you don't understand an investment, there's a good chance it's because the person offering the investment conveniently neglected to mention the investment's risks, fees and consequences of early withdrawal.

  • Keep money you can't afford to lose safe--in the bank, or in Treasury-backed securities or money market mutual funds.

  • Always check out the companies that will hold your money. Find out if they are licensed and where. You often can check online or by telephone with their regulatory agency to confirm this information, and determine whether any complaints have been lodged against it. Ask for information about an individual's background, and check it out independently. Examine web sites and trade associations for biographical information. Examine levels of education, experience and telephone references.

  • Beware of hype about returns. If a return is unusually high, it may be a bonus rate that could change. It could mean steep fees temporarily are waived. It could have been calculated over a unique period of great performance. Or, the fund may be unusually risky.

  • Probe for all fees and commissions.

  • Never sign any blank or incomplete form.

  • Make certain any checks for investments are made to the company with which you're actually investing and not the individual or his or her agency.


    Spouses Gail Liberman and Alan Lavine are syndicated columnists. You can purchase Alan Lavine & Gail Liberman's latest book Quick Steps to Financial Stability (QUE Publishing 2006) online at www.moneycouple.com or at your local bookstore. E-mail them at MWliblav@aol.com.

    To read more columns, please visit the column archive.

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