Now and then, I like to include articles to help you sock away some of your hard-earned money … in a way that both protects it and helps it grow for retirement or other needs. But each of us has different levels of knowledge and preferences. So how can you tell if you need a stockbroker to help you?
Many investors prefer to use a well-established financial firm to help them figure things out. It makes them feel safe and cared for. Especially when the money is being socked away for your retirement. Even if they wind up paying fees for that help.
Others use what they already know and can learn doing online research. And so they do it on their own, saving in fees and relying on themselves for how much their money grows. Or doesn’t. Not everyone is Warren Buffett.
Pros & cons of using a stockbroker
If you decide you need a broker — or simply prefer one — the first challenge is to find one you trust. And a good place to start is by asking friends and family you trust for recommendations.
Remember that you don’t have to use all their advice. But often an experienced broker has a good feel for the various market sectors and trends. And for a variety of individual stocks, bonds, etc. as they match your individual investment needs.
Why you need a stockbroker (maybe)
- A good stock broker is someone you can rely on to give you solid advice and protect your interests.
- The good ones also remember you exist and can alert you to changes in your investments that needs attention. Or expiring income investments you rely on, so your money doesn’t just sit earning nothing.
- Good ones also have a strong understanding of market fundamentals and more importantly your specific needs. So they can help you adjust your investments as markets shift and your life needs change.
What you don’t need from a broker
- Some brokers try to get you to churn your investments — or do it for you if they’re managing your account (for a fee). You may or may not gain from this (and short-term income taxes may eat any profits), but THEY always gain in lots of commissions. This is not an ethical practice.
- You don’t need a broker who acts like they listen to you and then ignores what you prefer — pushing you toward what they like — or maybe what they have been asked to push by their company. Even if it’s not what feels right to you, such as companies whose practices you disagree with.
- Steering you toward stock or bond funds that charge a fee to buy or sell if you don’t want that. These are called “load” funds. (I only buy no-load funds now.) I once had a broker get mad at me for refusing her suggestion for a load fund (brokers don’t earn as much). “You’ll earn more in the long run!” she said. I did just fine without.
- Brokers who only remember you when you can make them money. Look, I get that it’s a business. But when I’m choosing which broker to turn to with something new I want, who do I remember?
- And you don’t need a stockbroker if you really understand the market and can trade / invest on your own using low-fee firms like Fidelity or Vanguard or Charles Schwab, for example. These firms also offer some guidance for free as well as for fees (often lower).
A bit more
I wish I had a magic wand that could tell you for sure if someone will be good for you. Your retirement and even freedom to make decisions during your career life may depend on wise investing.
At the very least, it helps to take time to observe how well a broker listens and relates to you. And how well their recommendations reflect what your real needs are.
Just be sure to come armed with your own knowledge, as much as you possibly can. It will help you feel more comfortable when you interact. And it will help you ask good questions.
Most of all, it will help shape the relationship in a way that doesn’t put all the power in their hands. Even the good ones do better when you bring your own ideas to the discussion.
More posts to help
How Much Money Do You Need To Retire?
Retirement Reality: What Happened To The Dream?
Thinking About Retirement Way Before You Actually Retire
How To Create a Cash Flow Spreadsheet
How To Create a Budget Plan Spreadsheet
Why Diversified Investing Is So Important
I Want To Learn To Invest in Stocks
Roth IRA vs Traditional: What’s the Difference?
When Should I Use My IRA If Out of Work?
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