CNN Money is running a story about the most popular investment scams. Similar stories are being run on MSN Money and Bankrate as well. In fact, the story is everywhere.
Here are the top ten scams, as measured by the North American Securities Administrators Association. The links below provide more information on each of these scams.
1. Ponzi (pyramid) schemes
2. Unlicensed securities dealers
3. Unregistered investment products
4. Promissory notes
5. Investment scams that target senior citizens
6. Sky high-yield investments
7. Internet fraud
8. Schemes that target a race, religion or ethnic group
9. Variable annuity sales
10. Oil & gas scams
Take some time to look through the information. Education is the best defense against these scams. If you need to report a scam, contact your NASAA representative.
Borrowing from your 401(k) is generally a bad idea. There are some positive aspects of doing so, however. It’s a nice option to have if you are stuck with no other choices. Here are some of the drawbacks, as mentioned by Lewis Schiff from the Armchair Millionaire.
- The money you take out of your 401(k) for the loan will not be growing. Most people, while paying back the loan, stop making pre-tax contributions, which is a double whammy.
- Since you’re paying back the loan with after-tax money, taking distributions from that money will cause some funds to have been taxed twice.
- If you leave your job, the full amount of the loan could be due immediately.
- If you can’t pay back the loan, the unpaid balance will be treated like a distribution, meaning you’ll have to pay taxes and possibly penalty fees.
There are some benefits to being able to borrow from and pay interest back to yourself, but they do not outweigh the drawbacks.
In the interest of full disclosure, I might as well give you a a peek into the investing side of my net worth.
Invested in the TIAA-Cref Equity Index [TCEIX], directly with TIAA-Cref. The fund invests in the stocks listed in the Russell 3000 Index. It has a low expense ratio of 0.26%, which is not as low as Vanguard’s funds. I chose TIAA-Cref to start my Roth IRA since there were no minimum balance requirements and no fees.
I have a discount brokerage account with Wachovia [WB]. It was originally a UGMA account. After college, I withdraw a substantial portion to help pay down my student loan, but I don’t know if that was a good idea. Also, for about six months I was investing $100 into the fund at the beginning of each month. That was a big mistake because of the 5.75% load fee, 0.25% max 12b1 fee, and 0.59% expense ratio which all contribute to making American Funds‘ Investment Company of America [AIVSX] an expensive mutual fund to own and invest. On top of that, there is a $50 inactivity fee which I found out about last year. If I wanted to move the account to another brokerage, I’d have to pay Wachovia a $75 termination fee.
Knowing what I know now, I would have had this money somewhere else and in some other fund.
My 401(k) retirement fund is held with the company I work for and has what I believe to be a decent mix of funds. It has consistently performed well (knock on wood). It includes a company match, half of which is invested in my company’s common stock fund. I don’t have a choice in that. The other half of the employer contribution matches the pre-tax contribution.
The funds included are small and mid cap funds (PEGZX and PJGZX), large cap funds (PJFZX and BIGRX), and international equity (PISZX). I have chosen no bond funds for now, since I’m willing to take a little more risk as I have a long time before retirement. A little more than $10,000 of my 401(k) has come from my contributions while the rest comes from the employer.
You can view my account balances here.
Suze Orman is appearing on PBS right now on her fifth special, Young, Fabulous, and Broke. I’ll live-blog the first hour of the program. You can catch her on WNET 13 New York or possibly your local PBS station. Show them your support.
Read on and reload throughout the hour! Keep in mind my server is a little slow when it comes to posting.
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