That title is sure to make some people smile. I suppose if you really know absolutely nothing about stocks and investing, you are a prime candidate to be taken advantage of. The problem is that there is a learning curve and you are probably going to lose money in the beginning no matter which way you go.
Stock brokers can charge an awful lot in commissions. When you compare that to do it yourself accounts where you might pay 7-9 dollars for a trade, the savings is significant. I once asked what it would cost to make the same trade through a broker. Just by putting the middle man in the picture, I think the commission was around $150 or something like that.
Obviously, I would much rather pay the 9 bucks than $150! When you consider that there are going to be two trades, one when you buy and one when you sell, the savings are double!
Ok, to answer the question at hand. The only way you know you can trust your broker is if he is making money for you. If not, then what is the point?
Many brokers are simply looking for their next trade. It is to their benefit to have you trade as often as possible because each transaction signifies a commission for them. If you put yourself in their shoes, this only makes sense. We all need to put food on the table.
Since I have been making my own trading decisions for a long time now and I have enjoyed the savings, I would never use a high commission broker. The amount of money I save is significant.
However, you might be scared to death to pick your own stocks and I can understand that. You have a lot of questions. When do I get in? When do I get out? It is not an easy game for the novice and you can easily get your clock cleaned. I am not so sure you would do any better with a broker. If your broker was so good at picking stocks, why would he be working as a broker? He could be independent and trade for himself, right? He would not need to work as a broker.
One thing is for sure. If you have already been using a broker and he is making a lot of money for you, then why not continue? It is hard to argue with profit! But if the broker is losing money for you, then maybe you should think twice.
The game of stock market investing is a tricky one. If you could find a mentor who is willing to teach you, that might be best.
I can give you one clue however. The things that you think should be driving a stock’s price up and down probably are not what actually does. Anyone who is ‘in the game’ understands that last statement intimately. If you didn’t get it, then it is almost a certainty that you have a lot to learn!
Be careful when playing with stocks, you can really get your butt kicked. Should you trust your broker? Only if using a broker is profitable for you. That is the best measure.
If you have questions or thoughts to share, please use the comment box below.