I met a guy at a Xmas party who happened to be a broker for Merrill Lynch. I told him that I do my own investing through Fidelity's index fund and that I think investing is easy enough for lay people like me. I have money drafted every month into a roth ira and a regular account. So far my plan seems to be working.

In any case, he implied that he only takes 'big' accounts and that my account would not even qualify. Don't all account start small? If they don't take small accounts now, and those same accounts get bigger some day, what do they need Merrill Lynch for if the accounts grew without Merrill's help? Kinda circular, isn't it?

I wonder how much hot air is being blown around by this guy. Also, does anyone use these so-called full service brokers? what is the benefit to you over the guy at Fidelity? Are the broker stock tips really that much better? Just wondering out loud.

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Jennifer
90 350sdl

I have seen more bad advice come from Merrill than anyone else.

Yep, those are the people who use them.
I have a good friend who is a regional manager for Merrill. I let her manage my IRA for a while a few years ago, and the only thing she did was make me broker. Stick with your plan, and watch your investments like a hawk.

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Rick Miley
2014 Tesla Model S
2018 Tesla Model 3
2017 Nissan LEAF
Former MB: 99 E300, 86 190E 2.3, 87 300E, 80 240D, 82 204D Euro
Chain Elongation References

She used to call me and recommend the heck out of something. Found out a few years later that they were selling out of "inventory." They'd buy a huge block of stock and then sell it to customers at a markup. Oh, and charge a hefty commission on top of that.

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Rick Miley
2014 Tesla Model S
2018 Tesla Model 3
2017 Nissan LEAF
Former MB: 99 E300, 86 190E 2.3, 87 300E, 80 240D, 82 204D Euro
Chain Elongation References

Classic quotes from the past:

"Why do you think they're called brokers in the first place?"

"How does a broker make your portfolio worth $1 million? Give him $3 million."

"If your broker was so good, why isn't he rich?"

Yes, it is great to have a professional, whose primary focus in life is to watch the markets, understand trends, cycles and patterns and have very smart analysts and gurus giving them daily reports, but unless you're just in the market for short term gains on "hot tips" and want to "play the market" then investment strategies rely less on these "pros."

Big house brokers are demon's, if a business grad can't get a job they always end up at a big house.

I'd trust a car salesman over an investment broker.

That's my favorite, only a 24 year old stock broker that still lives with his mom and dad will tell you how to manage your money.

So true.

When I need advice, I usually ask the CPA that I use. In my experience, CPA's are very knowledgeable about retirement investing. I trust her more than any broker, that's for sure.

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I'd rather argue against a hundred idiots, than have one agree with me. — Winston Churchill

I guess, I should have said 'my' cpa.

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I'd rather argue against a hundred idiots, than have one agree with me. — Winston Churchill

Having done both, you're right.

I was pitching a stock to some guy one day and gave him the "I didn't get to be vice president of retail sales....." line. The guy says to me in this good southern drawl, "Son, look around, who isn't a vice president in your office"

We both had a pretty good laugh at my expense and I let him go. Got off of the phones about 3 months later.

Jennifer, Broker "suggestions"? I'm a former pro, yes, sad but true. Left that business years ago. Things are different today. Boy, what an understatement. The typical big firm broker when I was a broker was a functional idiot.
A great old saying, "where are the customer's yahts"?, comes to mind. The large brokerage firm fellows were then, very conservative. That said, I then knew of a handful of real pros. Would they handle a regular Joe's funds? No. Not then and not now. 99.9 % of the others, the idiots, the robot types, sure they will. They would put you into a loaded mutual fund. Loaded either front or back, commissions, the key point.
99.99999 % of tips are pure bull. Some, out right lies. Real tips are illegal and land you in jail. If, by chance you ever did learn something, something real, it had to be second hand info to be legal. Then, of course, you never do know if it's real. Trust me, you will most likely never recieve a great suggestion in your life. Investments are all pure common sense. If it doesn't pass what I call the smell sense, forget it. The best tip you can give a tip giving broker, "get out of the business".
Do I use full service, large firm brokers? Yes, but not for their suggestions, but because of their skills. Some brokers have certain experience levels. With one fellow in mind, no names now, that guy has all of my own experience levels. To buy or sell large blocks of hard to move securities, you use certain methods. An experienced broker will know the methods. We can say one word and it's as if a 10 year deal is laid out. It would take me an hour to tell a rookie broker what or how to do the trade. My pal, one word. This type of guy is one in a thousand, no kidding. The rest of them, they are clock punching zombies taking orders from the office managers who in turn, snap their heels to their managers. Get it?
Do you buy any odd products because of the quality level or service level? Buy the stock and own it for your lifetime or a minimum of 5 to 10 years. Think of a stock as you would real estate. Trading? Forget it, it's a shell game.
Shifting to Benz subjects, I see your a diesel lady. Want to move to the finest but a complicated Benz? Buy a 6.3. Not an investment, but they make the boring drive, interesting. 6.3s rule the Benz world.

Jen Tay,

You do not need a stock broker.

Sticking with index funds is a brilliant move. Why?

Study after study has failed to show the link between good past results and good future results. In fact, good past results is a better predictor of poor future results than good returns due to the concept of ‘reversion to the mean’. The only consistent reliable predictor of good future fund return is low expenses. Funds with no loads consistently outperform load funds. Funds with lower expenses consistently outperform funds with high expenses.

Everyone wants to beat the market. Unfortunately it’s more difficult than you think, especially over the long term.

Investing is a zero sum game. Investors as a whole make up the market, so as a group, investors can do no better than the market itself. If one investor outperforms the market, another one must underperform it by a like amount.
Mutual Fund Costs Diminish Returns. If funds had no costs, investors as a whole would match the market’s returns. But after costs (sales loads, operating expenses, and so on), investors do less well than the market, or index, because the market, or index, doesn’t have costs.

Financial markets are efficient. Information is so readily available, especially about large U.S. companies, that it’s tough for any fund manager to sustain a performance edge over the long term. Some markets are less efficient (international and U.S. small capitalization companies), but they tend to have higher costs, which diminish their returns.

Index investing has an inherent cost advantage. The indexing strategy minimizes fund costs, which can take a large bite out of your investment returns. Index funds have:
Low operating expenses. Index funds expense ratios average 0.28%. The average managed fund has an expense ratio of 1.5%.
Low transaction costs. An index fund does little trading. An actively managed fund’s brokerage and other trading costs may reach 1% of assets annually.

Over time, the broad U.S. stock market indexes have outperformed general equity funds, on average.
Over ten years, the total return of the Wilshire 5000 (1989-1998) is 414.67% (average annual rate of 17.80%). The average general equity fund cumulatively returned 312.48% over 10 years (average annual rate of 15.22%).
In the last ten years 11% of managed funds beat the S&P 500 index. Over the last 15 years only 4% of actively managed funds beat this index.

Yes, that's right. Only a measly 4% of actively managed funds beat the passive index.

Your odds at picking an actively managed fund that will beat an index fund over the long-term are so bad that you would be better off gambling at Las Vegas.

__________________
Paul S.

2001 E430, Bourdeaux Red, Oyster interior.
79,200 miles.

1973 280SE 4.5, 170,000 miles. 568 Signal Red, Black MB Tex. "The Red Baron".

Jen -- my employer went public last year, which prompted me to line up a flat-fee investment adviser. One of his first things he wanted me to do was to read a book called "Winning the Loser's Game." The theme: stick with index funds. The market is too efficient to permit you to win consistently by guessing what it's going to do.

That said, I'm thinking of throwing a little mad money at the Firsthand Tech Value Fund -- it turned $10K into $40K for me from 1998 to 2000. I smell a tech rally!!

Russ M.

I've been in the brokerage business for 10 years- my father got his start in 1968. All full-serve, 90% stock, 10% mutual funds. Some people need guidance, some are left holding the bag after a death or divorce, some are too busy running a business or traveling to tend to things.

And we apparently do a good job managing risk, providing for income needs, teaching about new areas of potential interest (covered call options- never gonna hear about that from a mutual fund co.), and making money for our clients.

Some of our accounts DID start out small- then a job change brought 401(k) money, then an estate was split up among the kids, then a business was sold. Other times, you do well with the small account and then another account transfers over from somewhere else.

I sympathize with those who have a bad image of the full-serve side of my business. I'd imagine I could do a good job for you, but no one is perfect. I never confuse 'genius' with a bull market. Happy Holidays!

kott and suginami, your knowledge of the market is needed in the social security thread.