Steer clear of ignorant stockbrokers

The Ticker

July 17, 1998|By Julius Westheimer

ARE YOU young and just beginning to invest? Are you afraid you don't have enough money? Cheer up; many brokerage firms will welcome you. Here's what happens when you start:

"Most first-time visitors to a brokerage firm are greeted by the receptionist," says a new, readable book, "Big Decisions: Small Investor," by Gordon Williamson ($12.95).

"Unless you ask for a specific broker, the receptionist will introduce you to the 'broker of the day.' This is standard procedure, but protect yourself from getting poor, inexperienced dangerous advice by asking the broker questions like these:

"What areas do you specialize in? How do you stay abreast of new investment opportunities? Will you show me some audited performance results? What formal training or education have you had? How often will you call or meet with me? How much experience have you had as a broker?"

Speaking of experience, the book advises, "Only deal with a broker who has had at least five years' experience. After all, if you went in for surgery, you wouldn't want to hear your surgeon say 'Gee, this is my first chance to operate!' "

Here's another danger signal. "The Small Investor," by Jim Gard, warns, "If you're just starting to invest, be aware that some day someone will call about a new, unknown or 'hot' stock that is 'certain to double in a year.' If an investment sounds too good to be true, that means the true risks have not been made clear. No investment offers uncommonly high rewards without carrying commensurate risks."

Here are more rules for the beginner:

* If you don't understand it, don't buy it.

* Don't expect your broker to be perfect.

* There are no emergencies in this business; don't ever be rushed into anything. Nothing will run away.

* Investing is not a contest. Don't worry about how someone else is doing; just pay attention to how well you are doing.

* Stick to quality and invest for the long pull.

* The time to invest money is when you have it; don't try to "time" the market.

* Put every dollar you can in tax-deferred retirement funds before investing in your personal account.

* You can't convince the market that you are right and it is wrong; the market is always right.

* You never have a real profit until you sell.

* Buying is easy; selling takes character and discipline.

* As the old saying goes, "Begin, be bold and try to be wise."

Pub Date: 7/17/98

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