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When To Say NO To Your Stock Broker

By Jason Markum

If you are at all like me, then you are absolutely terrible at picking stocks to invest in. Every time I have ever tried to do this, it has ended up badly. I mean REALLY badly. I once bought a thousand shares of a certain telecom stock only to watch it plummet down to zero several months later. I watched it go down, all the while thinking to myself “it’s bound to head back up!”….but the company went bankrupt and I lost everything!

So I decided shortly after that to stop using the bargain stock broker firms over the Internet that let you buy stocks yourself for like $9 bucks. Instead I went looking for a good full service stock brokerage firm that could give me good advice about what stocks to pick, and sort of tell me when I have made a terrible decision.

What I didn’t expect was how dogged they would be! Now I get phone calls from my broker every now and then with tips on stock to buy. The thing I didn’t realize at first is that stock brokers make nearly 100% of their income off of commissions.

The only way they make commissions is if you actually buy or sell stock! Stock brokers, therefore, are NOT buy and hold kind of players! They like to churn! Buy, sell, buy, sell, and a little commission goes into their pocket every time.

Ok, as long as I know that this is the game, I’m ok with it…and I’m still willing to play.

The problem is, sometimes my stock broker is a little too enthusiastic when it comes to offering me the latest hot tips. One of the most important things I have learned is how to say “NO” when my stock broker calls me with a tip. In this article I want to give you some advice on when to say no to your own stock broker.

The first time you should say NO to your broker is if they have a hot tip that about some coming “News” that is just about to come out. “We’ve got to get in before the news announcement!” they will say. You’ve got to ask yourself, if your little lowly stock broker already knows about it, then everyone else and their mother probably does too…so pass.

The next time you should say NO is when the stock market is falling. Often your broker will say something like “The stock is WAY down, now’s the time to buy on the bottom because it has nowhere else to go but up!”. That is not necessarily true…a stock that is falling is falling for a reason and until you know what that reason is, you should stay away.

Finally, you should say NO to your broker whenever he attempts to get you to “average down”. This means that the stock has fallen a great deal and if you buy more now then your average cost of owning the stock will go down making the potential gain (if a gain ever comes) that much bigger. Like the second tip, stocks go down for a reason and you should not buy, even to average down, until you know that reason.

So there you have three solid times when you should always say NO to your stock broker.

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