How to Tell if You Need a Stock Broker
March 28, 1999. Let me tell you about a story that happened to me in 1982. I walked into a top
brokerage house after reading a book titled, “The Dowbeaters” by Cobleigh & Dorfman. This book claimed
that the stock market was going to take off very soon. I wanted to get in on the action as soon as possible. I
didn’t want to waste any time in making some big time money.
As I walked into the brokerage house, a salesman approached and asked me if he could help. Here’s
Me: “I want to open an account in order to start trading on the open market.”
Salesman: “How much money do you have to start out with? The reason I ask is we have a minimum
of $20,000 for you to start with this company.”
Me: “You mean if I don’t have that amount, I can’t open an account with this company”?
Salesman: “That is correct sir.”
Me: “Thank you for your time, but I’ll have to go elsewhere.”
I turned around and left the office very angry because just a month ago that same person was
conducting a short seminar at a local school on “how to invest in the stock market.” He must have been
looking for someone who had a high bankroll.
After a month of reading some more material on choosing stocks, I went into another brokerage
house. I asked to speak to the manager, and I was directed to one of their best salesman.
After a lengthy conversation with this nice elderly person, he suggested that I put my money
into a cash account. He said that when he found something that he thought would be worthwhile, he would let me
know. I didn’t know what I was getting into! No sooner then a week goes by, he calls to say that he had a good
stock to buy. I still remember the company, ConAgra. At a price of $14.75, I purchased it, and told myself that
in no time I would be a rich man! Yea, right!
Three weeks later he called me up. He says it’s time to sell because it went up three points,
and I’ll be making a nice profit. Two months later and several costly trades, I began to understand that this broker
was in it to make a fast buck on my stupidity.
All stockbrokers are in it to make money for themselves first. Then maybe a little bit for you.
This is one of the reasons that so many investors are going in alone and trading online for themselves. They are
investigating the companies and making decisions they think will give them the best chance of making a nice profit,
whether it’s for a short or long term. The best part is they can eliminate the salesman’s commission.
Do you need a stockbroker? It all depends on how much time you have to investigate the market,
and if you think that you have enough nerve to do it alone. It is not easy. If the brokers really knew the best
stocks to invest in, would they be brokers? No, they would be in the market for themselves and making tons of money
without having to work for others.
If you go to a broker, make sure you tell them what you’re looking for, and what you don’t want.
Make it perfectly clear what your goals are. Remember, it is your money.
Oh, by the way, after four stockbrokers in one year, I decided that my best chance of making
money was to start doing a lot of reading, and not to rely on a person that was interested in their own welfare.
It has worked out very well for me.