| 1. Your stock broker has an inventory that his boss | | | | If you were unlucky enough to have bought in 2000, |
| wants him to unload. | | | | and many were because stock brokers had a big |
| Stock broker firms often buy securities in bulk and | | | | incentive then to unload their inventories, you would |
| then turn around and sell the stock out of their own | | | | still be suffering a loss 7 long years later. |
| inventory. However, unlike a retail store, your stock | | | | A simple CD would have outperformed this record |
| broker won't have a sale to move the product off | | | | and would have at least kept up with inflation |
| the shelf. Rather, the stock broker firm will turn up | | | | 4. Anybody can be a stock broker. |
| the pressure on its sales force to increase sales of | | | | Anyone can be a stock broker, including your |
| that investment. | | | | next-door neighbor or your used car salesman. All it |
| Don't be a bag holder: Stockbrokers may also trade | | | | takes is licensing by the state and federal |
| securities out of their own accounts, so in addition to | | | | government; which isn't quite as difficult as it sounds. |
| the commission incentive, there could be a profit | | | | Many stock brokers enter 5-day study courses, pay |
| incentive, as your stock broker sells you, taking profit | | | | their fees, take the tests and it's off to sales training. |
| on the stock his firm bought at much lower prices. | | | | Yes, that's right. Sales training. Stock brokers don't |
| Hidden fees and commissions: For more complicated | | | | have time to really learn how the market works |
| and longer-term investments, like limited partnerships, | | | | when sales quotas are their biggest pressures. |
| the stock broker firm may collect management fees. | | | | No other qualifications are necessary. A college |
| More commonly, bigger stock broker firms may pay | | | | degree is not needed. More often than not, stock |
| stock brokers more for selling the firm's proprietary | | | | brokers are not trained how to read market trends |
| products. Also, for some investments the stock | | | | or other techniques and they have no idea where |
| broker gets a residual payment in addition to the | | | | the best place to buy and the best place to sell is. |
| commission, which means he gets a percentage of | | | | What are important are sales quotas and commission |
| the assets as long as you continue to own the | | | | rates. |
| investment. But you may never know these things. | | | | The fact is, your next store neighbor can manage |
| Click here to see what is possible with just a little bit | | | | your money if he only decides to go out and take a |
| work and a simple game plan. | | | | couple of tests. But since your neighbor doesn't care |
| 2. A stock broker's main qualification is that he can | | | | about your finances any more than you care about |
| sell. | | | | his, we have one simple question to ask. |
| You may also be unaware of other incentives that | | | | Why not you? |
| increase conflicts. When a stock broker transfers to | | | | No, we are not suggesting you go out and take the |
| a new firm, he may be offered, in addition to a | | | | Series 7 and become a stockbroker. We are |
| signing bonus, an accelerated payout--a higher | | | | suggesting, however, that you take more of an |
| commission for the first month or year. | | | | initiative in managing your own future. You are the |
| You can imagine the incentive that stock broker has | | | | only one who cares, really cares how you do. |
| to "push product" before his commission drops to a | | | | You are the only one who does not have a conflict |
| lower percentage. Similarly, at the end of the year, | | | | of interest and will have only your own best interest |
| many firms pay their stock brokers based upon the | | | | at heart. And you can do it. It's not as difficult as you |
| percentage of commissions they generated on a | | | | may think. It is possible to earn tremendous returns |
| sliding scale. | | | | on your money while managing risk much better than |
| The more commissions over a year the stockbroker | | | | your stockbroker can or will. |
| generates, the higher his percentage goes and the | | | | Stop accepting meager returns that are eaten up by |
| more money he is paid at the end of the year. | | | | your broker's commission and conflicts of interest: |
| There's a natural conflict to try to generate more | | | | Your broker tries to get you to accept returns of |
| commissions at the end of the year based on this | | | | 7% - 12%, which is ok, but why should it take you a |
| higher payout. | | | | year to get there? |
| One of the worst atrocities is the sales contest. | | | | You work hard, but how much time do you spend |
| Brokerage firms will load stock brokers with gifts, | | | | managing your money? The simple truth is that you |
| trips or just extra money for selling over a certain | | | | spend 40 hours a week or more going to work. You |
| amount of a particular investment during a given time | | | | spend a couple hours a week mowing the lawn and |
| period. Rarely, if ever, are you the client made aware | | | | taking care of the yard. You spend an hour or more |
| of this. Even the most naive investor would think | | | | a day preparing dinner. You spend 2-3 hours a day |
| twice about buying an investment if she was told | | | | watching TV. How much time to you spend planning |
| that one of the reasons the investment is being | | | | for your future? |
| suggested to her is because some stock broker can | | | | Do you know that if you are willing to put aside just |
| win a trip to Hawaii. | | | | a few minutes a day that you can start earning |
| 3. Your stock broker puts you at way too much risk. | | | | returns on your money that dwarf anything your |
| Stock brokers are famous for telling you to buy and | | | | stockbroker promises you? Do you know that by |
| hold. But testing the record of this strategy is as | | | | spending just a few minutes each day that you can |
| easy as looking at a simple NASDAQ chart for the | | | | manage your risk much better than your stockbroker |
| past 10 years. If you had bought in 1997 you would | | | | can? It is no secret. The strategy is simple and if you |
| be sitting on a loss by 2002. | | | | take the time to learn, it will make sense to you. |