jhp012

I have never bought or sold stocks yet and would like to know the opinions on investing with a broker.

I picked up one of those MONEY magazines off the stand and skimmed through it briefly and I think there was an ad from FIDELITY stating their returns were 25%?

Did I read this correctly?

When you invest with a broker is there still a chance that you can lose everything? or is there at least a minimal gain?

Let's say I invest 10k. Can someone give me a rough estimate on how much I can gain in 1 yr , 2 yr and 3 years?

or what is a better broker company to deal with?

aklucsarits

25% returns? Maybe they might get lucky ONE year and hit 25%, but the average broker will struggle to beat the S&P 500.

Absolutely you can lose money with a broker making the calls. And yes, it's possible for you to lose all of your capital.

There's nothing magical about using a broker. He's just a man making picks on stocks and funds just like you would. He's probably doing a better job than you would about keeping up on market news and trends. But then you are also paying him a percentage of any gains he makes for you, and you are also probably paying him an annual account fee too. Some brokers actually make more money in fees for themselves off of you by "churning" your account - They buy and sell things constantly and take a fee each time. This is not an efficient way to invest because of high transaction costs and negative tax implications that can eat up any short term gains.

With only $10,000 to start an account with, you may be limited in your choices of broker too. An experienced, seasoned broker with many long term clients existing already could probably not be bothered to take you on as a client.

Andrew

cthree

Brokers want your money and will say just about anything they can to legally get it.

Brokers don't make decisions for you. They buy and sell stuff on your behalf and maintain your holdings in an account. They do all the legwork and paperwork of taking something from a seller and giving it to a buyer. That is all.

Fidelity is not a pure broker. They also sell their own in-house products (funds) and manage 401Ks, and do various form of asset management. They actually act as a proxy but that is beside the point.

What they really want you to do is sell you their mutual fund products. It is those funds which are managed. A fund manager buys and sells investments and as a unit owner of the fund you get a proportional slice of the the net proceeds. You don't control the individual stocks held by the fund, just a slice of the whole pie.

Mutual funds are managed by prospectus. This something of a business plan for the fund. It tells you what sort of investments they buy and hold as well as other data like the history of the manager and a breakdown of the expenses incurred. It also outlines if the fund has a load (commission paid to the seller) and if the commission is front-loaded (paid on the money you put in) or back-loaded (paid on the money you take out). FWIW You should never by a mutual fund with a load. Buy only no-load funds or some middleman salesman is shafting you.

Fidelity will "manage" your portfolio for you, sending you a quarterly statement with lots of colored pie charts breaking the news that your investment suck gently. 6/10% of all funds actually outperform the general market for a number of good reasons:

1) Most funds will participate in crappy investments, you know they suck, but they do it anyway because they have to, the prospectus says they have to.

2) They are inefficient. They are slow to react and have to unload such huge volumes of stock they either don't bother or do so very gradually in tiny chunks.

3) Funds are limited in size simply because it's not possible to have a fund which controls more than 50% of their prospective area. This means they tend to buy big chunks of a lot of companies and stay there since there is nowhere else to move the money. $50B is a lot of dough to invest in a limited market segment without actually buying an entire company.

4) The total value of all funds cannot exceed the value of all markets. There is more money under management than there is places to put it all. That means there will be a few winners and a lot of losers.

5) Since money can't realistically move much funds are stuck sucking it when their sectors go into decline. For example, Health care funds are going to suck when health car goes into decline or stagnates in the market. They can put the money somewhere else, its a healthcare fund so the best they can do is pick the best of the worst. Funds can show a number of years of great returns which they are in the sweet spot then years and years of way below average returns when a sector goes out of favor.

There are too many to list but there is a good smattering of what is wrong with mutual funds. it is my very well known opinion that mutual funds are for suckers to lazy or too stupid to take the time to learn to invest. Those people are better off getting a savings account or buying real estate than buying into the "wealth management" sea of lies and empty promises. Most people don't find out someone has been blowing smoke up their asses until it's too late and the damage done. You need to ask yourself two questions: Do you trust bankers? Do you trust bankers in Armani suits?

You will always do better, way better, by selecting a diversified portfolio of first rate companies stock that you know and understand. You can do this through an online discount broker with no fees and low commissions. I have many other postings on what and how I recommend people invest in the markets. Search will find them if you are interested.