At the end of the day, less than reputable stock brokers are not particularly concerned with how well your portfolio is doing or if you’re making any money from your stocks or mutual funds. This isn’t because deep down they have a desire to ruin your day. They’re simply salespeople who make money by selling you various types of stocks, and if they get a larger commission from a certain fund, they’re going to pitch that fund before others. If you have to deal with a stock broker like this at some point, all you need to do is be aware that their main priority is to sell so they can get a commission, and you can avoid losing investment money by watching out for these three main lies they might tell you in order to make that sale.
Hyping Up funds For No Reason
If your stock broker tells you that a mutual fund is “great,” you need to first know why it’s so fantastic. A fund isn’t just great all by itself. It either has to be doing something or having an incentive that makes it stand apart from other mutual funds. If you don’t want to throw away your retirement money solely on the word of your broker, then make sure you ask a few questions first.
Ask them if the fund has been proportionate with the S&P500 for the last decade. If they advertise as a “no-load” fund, ask if they have any extra sales fees. In addition to this, ask your broker to find some similar funds or ETFs, and then explain why he believes they are better than the others. These questions will help prevent stock a broker from selling you stocks that could drain your retirement account or endanger your savings.
Promises of Perfection
Be wary of stock brokers who promise that a fund or stock will be perfect for you. You want to be careful, because while the deal might sound good, you have to remember that they know nothing about your portfolio and your wealth management system. Unless you’ve talked with them extensively, they don’t know your long term goals or anything about your estate plan. They just want to make a stock or fund look good. If you want to know more about what types of stocks or funds would actually be perfect for you, talk with your financial advisor or get a financial advisor if you don’t have one. They will help further educate you on what types of investments align with your chosen goals.
Ongoing Observation of Your Positions
When you hear a broker state that they will actively monitor your positions after your sale, you will know right away they are trying to lure you into believing they are taking personal care of your account. They aren’t. They have possibly hundreds of clients and no way of actively monitoring all or any of them. Furthermore, if you’re buying stocks that need active observation, it’s probably not the right investment for you unless you want to be trading stocks all day, which is what you’re trying to avoid by using a broker in the first place.
All of this isn’t to say that you shouldn’t use a broker, but don’t mistake them for someone who will take a real personal interest in your investments. For the best advice on handling your portfolio, try hiring a financial planner, because they only benefit when you do.