Why Shouldn’t I Use A Discount Brokerage?
This is a really great question, especially since many of the most popular investment books available today say exactly the opposite.
They tell you that you can do it yourself, and for a lot less money, and you know what? They’re right! But as you probably suspect, there’s a hidden catch that they’re not telling you about. The catch is you.
You see, most of us are really skilled at one or more things, but there’s thousands of things we could be skilled at. I could walk down the street and stop any one of you and find out maybe that you’re a top-notch web designer, or a first-rate auto mechanic, or that you run an Alaskan fishing expedition, or any number of other possibilities that I don’t do.
Could I learn Adobe’s Photoshop and InDesign? Sure. Would that make me a web designer? Nope. Could I go to a nearby technical college and learn how to be an auto mechanic? Yes, but that wouldn’t make me a good one. And in the interest of full disclosure, I do my fishing at the local Kroger. I could certainly save some fees on those tasks by doing them myself, and so mathematically the do-it-yourselfers are correct, but that’s not really the issue when it comes down to it.
So can you invest by yourself and save some fees? Yes, you can. But that doesn’t make you good at it. And it doesn’t mean you have time for it. For example, you could get totally up-to-speed on all 4,000 or so mutual fund choices out there by reading their prospectuses, free to the public. If you read only five of those a day, you’d know everything there was to know about them in only 26 months! Doesn’t that sound like fun? J
And what’s more, you are emotional about your money – you can’t help it. The same thing is true for everyone else, and they can’t help it either. In fact, 80% of all investors lose money because they don’t have the experience to do what seems intuitive to all of us: that is, buy low and sell high.
Why is that? Well, buying low is pretty terrifying. How many people do you know who put a ton of money into the market on or around March 9th, 2009? That was the day of the most recent absolute market low at 6,547.05, as compared to today’s close (June 17th, 2010) of 9,816.49. If they had, they could be looking at gains of 50%. Of course, I could point you to over 120 individual stocks which have gained by more than 100% in that time. Now, did I know about that in advance? Am I like those guru’s all over the web selling you newsletters about their 1000’s of percent gains overnight? No. I just knew it was a pretty good bet, though not a sure bet (because there isn’t any) and I’m willing to talk to naturally concerned people about how it works.
On the opposite side, selling high tends to not work so well either, because that’s when the newspapers and television are all crowing about how wonderful everything is, again, finally. Who would sell then, when that great pick you made is headed to the moon (even though it’s not)? Sounds crazy, but that’s how we are.
Briefly back to the car mechanic analogy: would you study mechanics for a few minutes a week, open your hood, take off a few things and put on a few other things and then go tearing off down the road expecting the best? I hope not, and neither should you. That’s why we need professionals who take the time to hear us and coach us, and that’s what I’ll do for you if you want.
Want to know more? Let’s talk, and create a plan that’s right for you and your family.
Related posts:
- How To Handle A 401(K) Rollover To IRA
- The Investor - Advisor Relationship
- College Investing – Where Do I Start?
- How Can I Educate Myself About The Stock Market?
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September 18th, 2010 at 4:39 pm
That the catch is you? It’s because, if you use a discount brokerage, and you call them and ask them what you should do next, they’ll say, I don’t know, what do you want to do, it’s $8.95! That’s cheaper than me, but you get no coaching or advice….
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