The first step in protecting yourself from investment losses is to get as much information as possible. This means doing some research before you invest. Start off by getting familiar with who you are doing business with. Make sure you know a little bit about the broker and the firm before you invest with them. Most states’ Secretary of State or Department of Corporations can provide you with disciplinary information on your prospective broker or firm. Call them up and ask if there are any customer complaints or any "disclosable information" on the firm or individual. The NASD also offers a toll free 800 hotline on brokers and their firms. The number is 800 289-9999.

Knowing whom you are doing business with starts by treating cold callers and telemarketers with suspicion. Although there are plenty of honest brokers working the phones, there are an equal number of brokers operating from boiler rooms. Play it safe by having the broker send you information on his or her firm and the investment before you commit to any purchases.

There are several organizations that accredit individuals who have gone the extra step and earned a degree or degrees in financial planning. The designation CFP generally means years of study and a minimum level of competence that can be relied on by a client. Be cautioned however that designations do not guarantee the investments being made by those individuals will turn out as anticipated.

Once you have agreed to open an account, sit down with the broker and ask him or her to explain the forms you are filling out. Pay particular attention to the "new account form," which asks you to state your investment experience, net worth and investment objectives. If you do not fill out this form yourself, ask to see a copy of it before you deposit any funds into the account. Make sure the information on the investment objectives and net worth sections are correct.

During that initial meeting, or before you invest, ask the broker to explain the trade confirmations and the monthly statements to you. Brokers are required to send you trade confirmations which disclose the commissions paid, whether the transaction was solicited or unsolicited, and whether the firm was a market maker for the stock.

Monthly statements are complicated and are worth asking questions about. You might be surprised to learn how the firm calculates the value in your account, particularly if your account is on margin or uses borrowed money. Several firms offer monthly statements that break down the portfolio according to sectors of the economy you hold stocks in. Other firms break down your portfolio by the types of investments like mutual funds, stocks, bonds and direct investments or limited partnerships. Monitor this section and ask questions if the percentages become inconsistent with your objectives.

Once you open an account don’t be afraid to challenge your broker’s recommendations. Make sure you understand the risks of investing before you agree to a purchase. These risks include liquidity risks, or whether you be able to sell the investment for what you paid for it if you need the money.

If you take time to check out the individual you are dealing with, go in and visit him or her in their office, and ask to have the forms you are filling out explained to you, you will be off to a good start. Do not stop monitoring your mail. Open your monthly statements and trade confirmations as soon as you get them, and if you spot anything you don’t understand, make a phone call. Remember your broker is working for you. Make him earn his commission.