This article discusses
find investment advisor. Key to the
future: Pick the right investment adviser. It is the most important
financial deci¬sion you will ever make. In this difficult era of capital
preservation, the adviser can make or break you, as well as be the key
ingredient in your overall financial planning.
Recommendations: Mutual funds are the best way for small and
medium-sized investors to play the stock market. The problem is that
most funds don't practice market timing, and even the ones that claim
they do aren't good at it. Some of the aggressive growth funds lost up
to 80 % of their value in the 1973-74 bear market.
See
investment advisor
for more information.
Overall, you will do much better finding a really top-rated money
manager with whom you can have a true dialogue about your investment
objectives, tax situation, and feel¬ings about risk and reward. Also,
most small money-management tirms with excellent records have a good
sense about the major trends in the economy. Thus, you can also get a
lot of useful advice concerning strategy for your own business.
The ideal investment firm for the individual is a small- to medium-sized
one. Once a firm gets too big (say, $500 million of assets under
management) its record deteriorates. Primar¬ily, large firms can only
track the 500 largest companies, thereby eliminating investment in some
3,000 others, many of which have excit¬ing prospects. Avoid: Bank trust
departments. Their bureaucracy and lower pay scales are serious
hindrances to superior performance.
Be sure to look for the following: The firm did well
in adversity. Don't judge it only by its good years. Find out about the
bad ones.
The firm has continuity of management. If you do find a good investment
record, be sure that the money manager responsible for it is still
around. Equally important: The manager must still have actual portfolio
responsibility. It's no good if the person performs an administrative
function and leaves the decision-making to the staff.
The firm's managers have humility. The big talkers are either
exaggerating or have run up a good record largely through luck.
To
Find Investment Adviser -Top
There's no evidence of the burnout syn¬drome. After a
while, many successful manag¬ers become too wealthy or too tired, and
their incentive to keep making money for investors disappears.
When Not To Trust A Stockbroker: Recognize excessive
trading (churning).
Divide the total cost of commissions and account costs for the past year
by the average monthly equity (stocks and cash) in the account. The
result is called a turnover rate. The Securities and Exchange Commission
(SEC) considers a turnover rate of more than four excessive. A turnover
rate of six is consid¬ered churning.
Keep your eyes open for excessive markups (greater than 5 % above the
market price of an investment vehicle). A market like this can mean the
brokerage firm is buying the stock at the market price and then is
reselling it at a higher price to customer accounts.
Basic ways to protect yourself:
Don't open a margin account unless you are prepared to take significant
risks in playing the market. A margin account is inherently specu¬lative
and is thus the easiest target for churning.
Don't have more than one active account at the same time. Having two or
more will prob¬ably negate claims that the accounts are being churned or
that unsuitable investments are being made.
Make sure any discretionary account agree¬ment is in writing.
Consider filing a complaint with the SEC. It can censure the broker and
help the investor recoup losses.
Take the matter to arbitration. All the national exchanges are bound
legally to settle broker/customer disputes in this fashion, if the
customer chooses.
Warning: Avoid actual litigation unless there's big money involved.
Legal costs in a securities case can amount to $50,000 or more, since
these cases often run on for years.
Obviously, it is extremely important to make sure that you get any sales
agreement with a broker in writing.
Source: Consumer Information Center
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