Advantages of Investment Newsletters
Over Stock Brokers.
Whose advice would you trust more: a review
of a widget written by the owner of Widgets Emporium or a
review of a widget written by someone who does not sell widgets?
Obviously, the review written by the person who sells widgets
is highly likely to be biased. The same goes for investing.
You should seek independent advice, not biased
advice from a salesperson. And stock brokers are salesmen.
I know this firsthand from my experience working as a stockbroker.
Before we can discuss further the advantages
of independent investment advice, we need to understand what
a market maker is. According to Nasdaq, "Market makers
are securities firms that use their own capital to buy and
maintain an inventory in a specific company's stock. When
a market maker receives an investor's order to buy shares
in a particular stock, it sells those shares to the customer
from its existing inventory."
Stockbrokers of firms that are market makers
are often pressured to sell the "stock of the week"
which usually is a stock for which the company is a market
maker and is having trouble selling. The reason it isn't selling
well? It's a poor investment. Yet the brokers are given extra
commission to sell it. The whole compensation system seems
rife with conflict of interest.
To make matters worse, the riskier the investment,
the more the stockbrokers are paid. Where does the interest
of the client come into play? The company should be putting
the interest of the clients ahead of their own profits, but
sadly that is not always the case.
Things are not any better when it comes
to mutual funds. Oftentimes, the best performing mutual funds
are no-load mutual funds. If you are using a stockbroker,
they will not recommend that you use no-load funds since the
broker will not receive a commission. So if you use a stock
broker, you are eliminating 50% of the mutual funds from consideration,
many of which are the top performers in their categories.
So do you want someone giving you investment
advice based on how much money they will be receiving? I certainly
don't. To avoid this conflict of interest, subscribe to a
good investment newsletter such as ours. We are independent,
we aren't market makers, and we certainly recommend no-load
mutual funds for those who choose mutual funds over individual
stocks.
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