Should I trust a broker who recommends me to invest into specific stocks?

Best Answer:

Jim: 1. First of all, you have to understand that a broker makes money on commissions. Broker's income does not depend on your profit. No matter want, whether you win or loos, a broker makes his/her commissions. In many cases, lead by greed, a broker, may recommend to a client whatever gives him more comissions.

2. Common misleading is that many think that if a person has a license of an investment advisor or a broker then this person is highly knowledgeable in the stock markets and this person can make a profitable recommendations on investments. Wrong. The main purpose of licensing is to make sure that an investment advisor and or a broker does not break the law. The biggest part of licensing process is to make a sure that a broker knows what he /she can say and what should not be said to a client.

By saying all of the above, it does not mean that al brokers are bad. There are brokers who manage portfolios of expensive clients. While they make money on commissions, they have to hold rich folks who invest more than $1M with them. Losing a client is crucial for their income. Some of these brokers even hire team of analysts to help them. They issue newsletters to their clients, discuss strategies and etc. These type of brokers could give some good points about the investments. The majority of the rest are sales persons.

Other answer:

Jim:
If you invest in a low-fee, broad market mutual fund, you get a market return and no single stock risk. All kinds of bad things can happen to a single stock.
Ricki:
broker = salesperson

Do you trust the nice person at the used car lot ot pick out a nice car for you?

Mamie:
That's what stock brokers do. If you wonder whether you should trust him, then don't use his services.
The Old Guy:
Why not? Brokers are licensed to just that. Most brokers operate in the best interest of the customer.

Like anything else, if you don't trust the people you o business with, don't do business with them.

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