The two of them sat in a glass-walled cubicle with no privacy, and I could hear their every word as I waited for a manager to help me open a new savings account. The stock broker was a distinguished looking gentleman, probably 60-years-old or so.
He had white hair, dark-rimmed glasses, and he sported a suit and tie. He had a look of sophistication about him. His client, on the other hand, was a scruffy looking man in his 40's, with a beard and pony tail, dressed in a t-shirt and jeans.
Why Do They Call Him A Stock Broker? Because He's Broker Than You
This is one of the oldest jokes in the book, but in the example above, it was probably true. I don't know how the stock broker's client had accumulated his wealth, but from the conversation I overheard, it was clear that he had done well.
He certainly didn't look the part of a trust-fund baby, so it's probably safe to assume that he got his money the old-fashioned way - he worked hard for it, probably by starting a small business that grew into a not-so-small business.
The stock broker, on the other hand, was working at a bank in what should have been his retirement years. He had the pompous air of unearned wealth, but it was undoubtedly all a fraud. Still, he acted as if he knew it all and his client knew nothing. Sadly, while the former clearly wasn't true, the latter seemed to be.
Where Does a Stock Broker Get His Information?
In the old days, stock broker was a profession of power. Only stock brokers had access to the information that was necessary for making informed investment decisions.
But nowadays information about stocks is abundant. This is similar to how real estate agents used to have an informational advantage, but they are slowly fading into obsolesce as advances in technology like the internet make buying and selling a home on your own a little easier each year.
Stock brokers have no value if they don't wield informational power, and in today's world, they simply don't.
Take my experience in the bank today. The stock broker was literally navigating Yahoo! Finance and showing his client charts of his stocks.
He verbally explained the chart patterns with such simple language as, "As you can see, it went from 50 to 60, back down to 55, and now it's been puttering around at 53.50 for a few months..."
Worse yet, the stock broker actually clicked on "Analyst Opinion" to tell his client what other analysts were saying about his investments - the client was paying his stock broker in order for the stock broker to tell him what actual experts were saying! Unbelievable!
Don't Be Like This Stock Broker's Client - Do It Yourself!
But even more shocking was the fact that the client seemed happy with this service. He seemed to think that his stock broker was an investment genius because he knew the URL to Yahoo! Finance and how to navigate around the site.
Clearly, this stock broker did not possess any real knowledge or aptitude that his client could not attain or develop for himself. Although the client had made wise decisions for himself in the past, it's unlikely he'll hold on to his wealth unless he develops his financial intelligence in the near future.
Don't be like this client - be your own stock broker!
How To Be A Stock Broker
How can you put a limit on learning more? The next section may contain that one little bit of wisdom that changes everything.
I should begin this by saying that stock brokers are expensive. However, if you are new to the world of investing and find the terminology, expenses, fees, and process the least bit confusing it is best to utilize the services of a stock broker that is going to work with you every step of the way and explain the way things work at least for the first several trades you make. Stock brokers are paid through commissions that are earned every time you buy or sell a stock.
For this reason they are great for advising you on which stocks to buy or sell though their main goal is to keep you buying and selling because they earn money on each transaction so be sure to take their advice, to some degree, with a grain of salt.
That being said a good stock broker can help you learn the ropes about trading stocks when you are just beginning in your investment efforts. Their advice and services can be invaluable and well worth every penny you pay them provided you find a broker that is going to work with you even though you are, presumably, going to be trading on a much smaller scale than some of their high dollar clients. In other words you want someone that is going to work with you even though you aren't likely to be their biggest client anytime in the near future unless they make some excellent decisions on your behalf.
Stock brokers can also provide excellent insight and invaluable advice on how to diversify your portfolio in order to minimize your risks as far as your investments go while building the foundation for a successful future trading in the market. More importantly a stock broker can help you identify diamonds in the stock business that may be disguised as lumps of coal. They have a great deal of experience in this business, even more education, and often times excellent gut instincts about what is coming next in a given stock.
This by no means indicates that the services or advice of stock brokers is somehow infallible. This isn't the case at all. Everyone makes mistakes but by following the advice of a stock broker you are much likely to make fewer mistakes than if you were going it alone because you can learn from past mistakes the brokers have made and hopefully avoid future mistakes of your own by taking their advice and guidance to heart.
If the high commissions of brick and mortar brokerages are hard to come by or sacrifice you may want to consider an online stock broker. While they often won't have the pedigree and credentials of some of the stock broker experts that can be found in many financial institutions on Wall Street they also do not charge commissions that match those pedigrees and can be invaluable in helping you make the most of your stock market investments.
Learn when to take the advice that is given for what it is worth and use it to your advantage. Their advice can still help you much more than trying to muddle through the intricacies of investing and online trading on your own.
If you decide not to go with a stock broker you need to understand that you are doing so at your own risk. The roads of the stock market are difficult to navigate even for those that have some degree of experience and there are few roadmaps to help guide you along the way. A qualified and competent stock broker can be the difference between a successful investment future and a losing your shirt on your first time out of the gate. Take advantage of the benefit that a stock broker can bring to the table until you are confident in your ability to navigate these waters on your own. It can make all the difference in the world to your portfolio.
Now that wasn't hard at all, was it? And you've earned a wealth of knowledge, just from taking some time to study an expert's word on Stock Brokers.
Both William Smith & Kelvin Williams are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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