If you are one of the many people who are averse to reading prospectuses, let me explain something: Prospectuses are like martial arts. They can teach you self-defense.

Having written prospectuses as a young Wall Street lawyer, I can share a few tricks on how to make it through the legalese.

First, don’t confuse a prospectus with literature. Forget about reading one from start to finish as you would an article or a story. Read it as you would a warning label on a bottle of prescription medicine, remembering that the prospectus is there to protect you. Read it for signs of danger -- that is, anything that you can misunderstand to your detriment.

What’s an example? If you are attracted to the product because of guarantees presented to you orally, you’ll want to confirm your understanding with language in the prospectus. You can ask your adviser to point out the relevant language.

Other examples: What about penalties for early withdrawal (contingent deferred sales charges)? Or something that can work to your advantage, such as a waiver of sales commissions for IRA accounts?

Second, remember that a commissioned adviser’s job is to sell. Your job is to be a skeptic. Read the prospectus to find reasons you may NOT want to buy the investment. Example: Costs are too high.

Third, scan a few prospectuses. You’ll see that they follow a formula. One section will explain the investment; another will discuss risks; others will set out how to buy, how to sell, charges and fees, taxes and so on. Some products come with prospectuses in multiple parts. Be sure to get them all if you are investing serious money.

Fourth, when in doubt, compare and contrast. For example, if you are presented with a variable annuity with guarantees that are hard to understand without an interpreter, ask a competing salesperson to present you with a product he or she would recommend. Have each person present the pros and cons of each product, but don’t stop there. Compare and contrast each prospectus as well, section by section.

Fifth, don’t buy something before getting answers to the following key questions:

1. What does the investment promise to deliver?

2. Under what conditions will the promise not be delivered?

3. If there are guarantees, against what, by whom and under what circumstances? Guarantees of any sort need to be studied closely, since they can be misunderstood. Unconditional guarantees don’t exist.

4. What are the risks associated with the investment in normal markets as well as in the worst-case scenario?

5. What is the most you can lose, and under what circumstances?

6. How can you get your money back?

7. Are there any penalties?

8. What are the tax consequences?

9. What are the costs of buying the investment, compared with the cost of owning the investment, and the cost of your selling the investment?

10. What does the salesperson make if you buy the product?

With the information you find in the prospectus, you can ask more direct questions and, ultimately, make a more reasoned investment decision.

As a rule, you don’t want to buy something until after you have read about and understood the benefits and the risks of the investment, especially if there is pressure to take advantage of a special feature, such as a bonus that is “only available until 3 p.m. today.”

If you are uncomfortable for any reason, pass up the opportunity. Others will come along.

If you would like more information on this topic, the U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy has created a three-part series on reading a mutual fund prospectus (tinyurl.com/3c9btrhz).

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Members of Generation Z (ages 12 to 27) are continuing to move into the workforce, and they are beginning to save for retirement. If you were born between 1997 and 2012, let's talk.

I'm all for starting to save for retirement as soon as you start to earn wages, for a very simple reason: The longer you have before retirement to save and invest, the more retirement security you can create for yourself. That's the magic of compounding. (Read more about compounding at the Consumer Financial Protection Bureau -- tinyurl.com/ymyv8bkn.)

Even a 12-year-old can earn money by doing odd jobs, such as mowing lawns or babysitting, and put some or all of those earnings into a Roth IRA of his or her own. (A parent will need to be the custodian or guardian. See an example of how it works at Fidelity Investments -- tinyurl.com/ms2eytnh.)

If you need some motivation to get started, consider this: You are a generation in which the full retirement age for Social Security retirement benefits is currently 67, yet the latest report from the Social Security and Medicare Board of Trustees indicates that the federal retirement program will only be able to pay 100% of total scheduled benefits until 2035 -- when the oldest of you will be 38 (tinyurl.com/npxc2yse).

You may tell me that you don't want to think that far ahead. That's how more than half of you feel, based on a recently released Transamerica Center for Retirement Studies' 24th Annual Retirement Survey of Workers that surveyed Gen Z's who were 18 years old or older and were working part or full time (tinyurl.com/yb2epyrz). Fifty-three percent either strongly or somewhat agreed with this statement: "I prefer not to think about or concern myself with retirement investing until I get closer to my retirement date." From my perspective, that's a clear giveaway of not understanding that time is the essential element that drives compounding.

Some Gen Z members surveyed are planning on living to age 100 or older (18%), and 15% plan to live into their 90s. These can be realistic assessments, since we are living longer (the life expectancy at age 65 for the U.S. population rose to 83.9 years old in 2022, according to the National Center for Health Statistics -- tinyurl.com/4f3z93sk). That means that Gen Z's will need enough retirement savings to support themselves for four decades after they stop working.

The time to start planning is now. Guessing how much of an effort is needed is not a good idea, yet 47% of Gen Z's surveyed did just that. They guessed about savings goals -- again, not a good idea.

This is where the need for financial literacy education at earlier ages becomes apparent. The Next Gen Personal Finance website (ngpf.org) provides financial education resources for teachers, with the organization's goal being that by 2030, every high school student will graduate having taken a one-semester course on personal finance.

To further your own knowledge outside of school, look for credible resources. Investor.gov is a website of the U.S. Securities and Exchange Commission. The site's Introduction to Investing section (tinyurl.com/3fkbnker) features details on various investment products and retirement plans, as well as the Roadmap to Saving and Investing.

FINRA, which regulates the U.S. bond market, provides sections on personal finance (tinyurl.com/bdtmbhry), investing (tinyurl.com/muyuj33k) and protecting your money from fraud (tinyurl.com/bdf9jd3t).

The Consumer Financial Protection Bureau offers helpful information on how to create and maintain an emergency savings fund at tinyurl.com/56v9nnzd.

As a member of Gen Z, you have the benefit of a long, long time to build up your efforts to save for a full and meaningful retirement. I encourage you to get on track if you are not fully engaged. Your financial future is closer than you think.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

There are many research tools available to help you pick stocks for your portfolio.

But don’t put those research tools away after you’ve made your purchases. The act of buying a stock does not put an end to research, and it begins a process of careful monitoring to determine whether you should continue to own the stock.

When should you sell a stock? That depends on what you are trying to achieve. An investor’s goal is to accumulate money for a specific need, such as retirement. A trader’s goal is to make as much money as possible in as little time as possible.

If you are trying to trade for a profit, then your selling rules will focus on near-term data, such as price and volume.

A successful trader will sell out before losses mount, while letting his profits run. He may set a stop loss at 10% below his purchase price. If the stock has a run-up, he may sell it after he achieves a certain profit. Or he may hold on to the stock until it starts a retreat from a high.

Most people are not traders, however, nor should they be. Someone who invests for retirement has a longer horizon than a trader, and a different motive for owning stocks. The purpose of the rule set remains the same: to allow you to profit from the stock while protecting you against losses. However, the methodology is different.

Instead of focusing on intra-day changes in prices, investors with a longer horizon will sell when the stock fails to meet selection criteria.

Let’s say you chose a stock because it was a leader in its industry, with solid earnings growth and low debt. After a few years, you see that the company begins to lose its leadership position to a rival and significantly increases its debt load. No longer meeting the criteria you used to buy the stock, you sell it, irrespective of whether you’ve made a profit.

Here’s another example. If you are using Value Line for stock selection, you might be buying stocks that are ranked 1 or 2 for safety. You would sell when the stock falls in rank to a 3 or below.

What about taxes? Taxes should not get in the way of your selling discipline. Taxes are a fact of life. If a stock needs to be sold, sell it.

Individuals need to avoid some bad habits in order to improve their results.

First, don’t sell in reaction to the news.

Second, don’t sell your winning stocks too soon.

Third, don’t hold on to your losers with the idea that you’ll sell them after they turn a profit.

Fourth, don’t overestimate your knowledge or skills. Sell the stocks that were mistakes to make room for better choices.

Fifth, sell stocks that you shouldn’t own because they are too risky considering your financial situation.

Sixth, recognize that you are not investing to win a contest. Outperformance is not the goal.

Seventh, don’t trade too much. Based on studies of individual investors, those who trade the most earn the lowest returns.

Eighth, don’t act impetuously. Fish are caught because they snap at the bait. There will be plenty of opportunities to make a profit, all in due time and after careful consideration.

Finally, develop your own set of selling rules and follow them. If you don’t, you’ll find yourself using the “cross your fingers” method, hoping your losers will recover and that you’ll catch the next boom before riding it all the way down.

Good investing is a result of planning, careful stock selection and knowing when to sell. Losing portfolios are made up of random activity in reaction to a sales idea or something you see on the news.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION