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The Financial Industry Regulatory Authority (FINRA) issued a new investor alert called Stock Up on Information Before Buying Stock to caution investors to carefully research any investment before making a purchase. There are well over 20,000 companies whose shares trade either on a U.S. exchange or over-the-counter. With so many companies and trading symbols, there is ample room for confusion.
“Before buying an individual stock, investors should fully understand what they are buying in order to avoid potentially costly mix-ups or mistakes,” said Gerri Walsh, FINRA’s Senior Vice President for Investor Education.
Stock Up on Information includes a series of practical steps investors should take before investing.
Research the company. Do your homework by thoroughly researching the company before you purchase stock in it.
Find out where the stock trades. Find out whether the stock is listed on an exchange or quoted over-the-counter.
Make sure you are buying the intended security. When placing an order, make sure that the symbol you enter corresponds to the company whose shares you intended to purchase.
Mind your “Q”s. A fifth letter “Q” at the end of a stock’s trading symbol often denotes bankruptcy status of the quoted company.
Understand the IPO Process. There are a number of steps in the IPO process that must be fulfilled before the public can purchase shares.