Your Wealth, Health, And Lifestyle Newsletter

Should You Listen To Your Stock Broker?

By Jason Markum

Investing is really freaking hard (RFH) tm and you never know who to turn to in order to get investment advice. Some people listen to pundits on financial television shows like CNBC or Bloomberg but those people always have a vested interest and should never be listened to for advice.

Some people get “hot tips” from friends and family members. Think back over your life. Have you ever gotten a hot tip that actually worked out in the long term? I’m going to go out on a limb here and guess that the answer is a resounding NO!

And then there are the people that get their advice from a stock broker. What better, they think, than to get advice from some one who actually works in the field day after day investing lots of money in the stock market!?

There’s a major problem with this logic though…it’s flawed!

Stock brokers are not trained in picking stocks! They are not licensed to pick stocks! They actually don’t have anything to do with the stock market on a daily basis in almost every case.

Stock brokers are simply salesmen. Their job is to get you to buy stock. More specifically, their job is to get you to buy stock from THEM! Whenever you buy or sell a stock, they get a commission.

Sure, if the stock you buy doesn’t do very well, you may go to a different stock broker, but most people don’t. They grin and bear it, and decide that it was some how their own fault.

Technically speaking, a stock broker by law is not supposed to give you investment advice because of this massive conflict of interest. But most do anyway. That’s just the way it goes.

But now you know better. Now you will stop asking your broker for advice. Think of them as used car salesmen and you won’t be far from the mark. Would you ever go into a used car lot and ask a salesman which car is right for you? Of COURSE not! They are going to put you in the car that makes them the most money. So it is with stock brokers.

Now of course, I’m painting them with a broad brush here for dramatic effect. They aren’t all evil, some of them might actually be very good at sniffing out good deals for their clients. But by and large one of the main reasons that we have so many small investors lose their life savings in bad investments is because they listened to bad advice.

Don’t be a lemming and just do what your stock broker says. Create a plan and stick with it and you may not even need a stock broker at all! With the advent of online trading, why pay a broker $100 per trade when you can do it online yourself for $9 bucks?

At least that’s my opinion…but then again, I don’t think individual investors should be in the stock market at all. Just stick to a nice broad market index fund like an S&P 500 index fund by making annual monthly automatic investments into the fund straight from your paycheck and you won’t have to worry about any nonsense like this to begin with!

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