Your Broker As A Cheat (Part 10)

There is a joke:

What's the difference between buying a lottery ticket and buying a penny stock?

In the first case, you help finance your local municipal swimming pool. In the second case, you help finance the stock broker's home pool.

A typical broker charges hefty commissions only because he is able to detect your greed for a quick buck.  However, in the event you do wish to work with a broker who charges top fees, you must see whether his advice adds value to your portfolio and is in excess of his brokerage.  Specifically, you must look for

-          An investment strategy that suits your needs and your risk profile.  The broker must be able to align and  integrate your goals with the market ON A CONTINUOUS BASIS.

-          Your broker must be able to realistically assess the direction your portfolio is taking with the ongoing market moods, sentiments and the overall financial and economic milieu.

-          Your broker must be able to answer every question about every stock he recommends.  However, it will be your duty to do the due diligence.

-          Your broker must manage your portfolio in a tax efficient manner.

-          Ask your broker to benchmark your portfolio to a comparable index.  Ensure that there is regular and substantive communication from him to you as regards this.

-          Your broker must have a passion for his work.  You must observe from his body language and communication as regards what drives him – his desire for excellence or his desire for his brokerage. 

If your broker is unable to provide you something on the lines of the above list, do yourself a favour and take your account elsewhere.

©Nitesh Kotecha