What Are Beginner Investor Questions?

Asking questions is essential as a beginner investor. Understanding what you are investing in, its relevance to your goals, and the potential downsides provides peace of mind. You are likely to make proper investment decisions and attain your short- and long-term objectives.

Educating yourself as a beginner investor sets a foundation for future success. Regularly asking questions about your investment options, decisions, and portfolio’s performance helps you make relevant adjustments to live well and retire comfortably.

Consider asking the following questions before making investment decisions.

1.   Is the Seller Licensed?

Always check the background of someone promoting an investment before learning about the opportunity. Consider using the following resources to investigate specific parties:

• Brokers: Visit the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck website for details about a broker’s background and qualifications.

• Investment advisers: Visit the Investment Adviser Public Disclosure website for information about investment adviser firms registered with the Securities and Exchange Commission (SEC) and most state-registered investment adviser firms.

• SEC actions: Visit the SEC Action Lookup – Individuals website to look up information about individuals named as defendants in SEC federal court actions or respondents in SEC administrative proceedings.

• Investment professionals: Call the SEC’s toll-free investor assistance line at

(800) 732-0330 if you have questions about an investment professional’s background or are unsure whom to contact.

2.   Is the Investment Registered?

An offer or sale of securities must be registered with the SEC or exempt from registration. Registration provides investors with access to information about the company’s management, products, services, and finances. You can check whether an investment is registered with the SEC through the SEC’s Electronic Data-Gathering, Analysis, and Retrieval (EDGAR) system or by calling the SEC’s toll-free investor assistance line at (800) 732-0330.

3.   Am I Comfortable with the Level of Risk and Potential for Loss?

Every investment carries a degree of risk. Typically, the higher the potential return, the greater the risk of losing your money.

For instance, although the risk of losing money in a savings account is virtually zero, inflation might be higher than the interest rate on the account, reducing your purchasing power. In contrast, you might purchase a stock and generate returns through dividends and by selling it for a higher price than the purchase price, but market volatility can cause the stock to lose some or all of its value.

If you are considering an investment that offers high returns, determine whether you are prepared to risk losing some or all of your money. Also, diversify your portfolio across asset classes, industries, and geographies to reduce overall risk.

Because diverse types of investments perform differently under changing market conditions, the poor performance of one investment might be offset by the better performance of another. Reducing the potential impact of one underperforming investment helps develop more consistent returns and protect against volatility. 

4.   Do I Understand the Investment, and Could I Easily Withdraw My Money?

Understanding what the investment is, how it works, which company offers it, and how easily you could withdraw your money if needed is essential. If your plans change, or you reach your short-term objective, you need to know whether you can receive your funds within a reasonable time. Read the investment’s prospectus or disclosure statement or talk with a licensed financial professional to clarify these details.

For instance, determine whether other investors are buying or selling similar investments daily, such as on the stock market, and whether you would need the investment provider’s agreement to sell the investment. If withdrawing funds would be difficult, consider other investment options.

5.   Should I Talk with a Financial Professional?

A licensed financial professional can answer your questions and guide your investment options. Ensuring you understand the investments and how they can help reach your goals provides peace of mind and increases the likelihood of success.

*This information is for educational purposes only.