Investor Alert
"China" Stocks—Look Beyond the Name Before You Invest
Economic growth in China and strong performances by the Shanghai and Shenzhen Composite Indices are fueling the touting of low-priced "China" stocks. But some of the companies being touted all too often have no actual connection to China's stock markets. We are issuing this Alert to warn investors about scams that promote the latest "hot" China stock and to provide information on how to invest wisely in China.
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Investing with Borrowed Funds: No "Margin" for Error
Investor purchases of securities "on margin" have grown dramatically in recent months. The amount of debt taken on to buy securities has been growing steadily over the past few months and reached a record high of $321.2 billion in February 2007.
Many investors may underestimate the risks of trading on margin and misunderstand the operation and reason for margin calls. Investors who cannot satisfy margin calls can have large portions of their accounts liquidated under unfavorable market conditions.
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Want More Margin Information?
NASD has issued investor guidance to provide some basic facts about the mechanics of margin accounts. This document also provides examples in order to help illustrate margin transactions.
Market Risk: What You Don't Know Can Hurt You
When the Chinese stock market dropped by 9% during a single day in late February 2007, markets around the world quickly felt the impact. In the U.S., the Dow Jones Industrial Average fell by 4.3%, its worst decline since the aftermath of the September 11, 2001 terrorist attacks. These events underscore how important it is for investors to understand the concept of market risk.
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Investor Resources
New, Improved NASD BrokerCheck Goes Live
NASD has launched an updated, redesigned version of its popular online BrokerCheck service. The updated version expands the amount of information about individual brokers and securities firms available to the public, and promises a more user-friendly experience.
Use NASD BrokerCheck
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Investor Education
Understanding Risk
Investing always means taking a risk, but not every investment carries the same level—or even the same type—of risk. For most people, risk means a possible loss of principal. But the risk of investing in insured products introduces the possibility that your rate of return won't outpace the rate of inflation. In other words, your account balance might increase over time, but your buying power might decrease anyway.
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Bond Investing Carries Risks, Too
As with all types of investing, bond investing comes with its own set of risks. For example, a cardinal rule of bonds is that when interest rates fall, bond prices rise, and when interest rates rise, bond prices fall. Interest rate risk is the risk that changes in interest rates in the U.S. or the world may reduce (or increase) the market value of a bond.
Call Risk
Default and Credit Risk
Past Issues of Investor News Available
In response to numerous requests, previous issues of Investor News are now available on our Web site.
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