Should you rely on stock market brokers for investing advice?

stock market brokers for investing advice

It’s natural to go shopping for ideas if you want to invest. You may have loads of questions piled up in your head. What should I invest in? Whom should I ask? Where will my wealth grow the most? Is it a good time to invest? How much should I invest? Finding the best investment deals can be hard. You want to be sure you don’t miss an opportunity. There are ideas wherever you look. Moreover, there's enough advice and opinion going around to feed a nation! However, that doesn’t mean that all sources are necessarily good ones. 

Perhaps, the idea you get from someone else may not be a bad move, but not every choice of investment may be appropriate for you. Your portfolio may have different financial goals. Similarly, you may be a different kind of investor. For instance, it’s a good idea to invest in the share market today if your tolerance for risk is high, but what if it’s not? Before you execute that “hot”  stock tip, retrace your steps and think of the source. The hot tip may land you in hot water. 

Which is the Right Source?

Investment can turn into a somewhat catch-22 circumstance. People want to invest, but may not understand the first thing about investing. The obvious solution is to take someone else’s advice. But who? Furthermore, because investors may be confused themselves, they don’t know whether the advice they’re getting is good or not. 

There are also those situations in which you get a plethora of advice, and finally get muddled up  instead of enlightened. Someone may judge the stock market today as the best place to invest. Everyone and anyone seems ready to dish out advice of a financial nature, including relatives, friends, colleagues, cab pool passengers, and many more! There’s a similar issue with professional advice. Similar in the sense of whether it’s aimed at your own good or not. If financial advisers are working on the basis of a commission (as is nearly always the case), then the professional advice is driven by materialistic considerations, rather than by serving your financial interests. 

Assess Yourself and Your Goals

Firstly, investment should be suited to investors. There are investments that match investors and their myriad goals. There are also investments that match the behaviour of investors. Certain investments like stocks generate risk, and investors with risk-tolerance may do well with these. In case you are averse to risk, but don’t mind taking calculated risks, then a mutual fund investment may suit you more. 

Your financial goals are important too. If you can afford to take risks and want good returns for the long run, you should open a Demat account and invest in equities. If you have short-term goals in mind, it’s better to look at government bonds and fixed instruments. They give you low returns, but offer high liquidity, in case you need cash urgently. You can also consider high-yield savings deposits. 

Talk to a Professional 

Friends and relatives may be well-meaning in their intentions, but they may lack the  knowledge that a professional, like a good broker, possesses. Furthermore, as stated earlier, your goals and financial behaviour may be very different from that of your relatives and friends. Additionally, while taking the advice of family and friends (and giving it), there is always a lack of objectivity. One tends to think  from an emotional point of view, rather than from a viewpoint of reason. 

Once you know your own financial goals, how much you can afford to invest, and the kind of investor you are, you can do some research on your potential investment options yourself. You may just find out that the share market today is the right place to start. If you have a good deal of information on your side, you can take a reputed broker’s advice, one like Motilal Oswal, for instance. After you get the advice you’re looking for, the ultimate decision is yours. You can do further research based on the professional advice you get. 

Experience Counts

This is why you need a professional to advise you:

  • Expertise in the Field - A third-party professional, one that has a track record of success and experience, is the entity or individual to take advice from. This helps you build a diversified and profitable portfolio. 
  • Research Proves Professionals are Better - Studies in the area of behavioural finance display results that peers may affect our investment decisions in negative ways. You may well listen to a friend or relative without objective thought or logic. 
  • Decision-Making is Personal - Investment decisions are personal and your relatives may not understand your finances properly. Additionally, their “advice” comes from their own experiences and not any logical analysis. Most “advice” may be given in passing, with the mere mention of mutual fund investment being the trend today, or some such thing. Thus, opinions are given glibly, and you may pay heed seriously, ultimately taking a decision you may regret. 

A Winning Combination 

Many people may be tempted by the stories of success of relatives to jump on the same investment bandwagon, only to find disappointment later. The problem is that relatives are emotionally close to you, so you automatically pay heed to them. It’s important to note that any investment instruments and products are not good or bad as such. It all really depends on your own financial situation and personal circumstances. Friendly advice is informal advice. Relatives do not assess tolerance and capacity to take risks before they recommend investments. The advice they give has a basis on just a single parameter - returns. Thus, the product suggested could be totally incorrect. 

Reward versus risk is a crucial factor for selecting any investment product. Furthermore, your relatives don’t normally take your specific time span horizon into consideration. Any financial decision cannot be an isolated decision. When you open a Demat account for the first time, it may be on the advice of relatives, but you should talk to an experienced hand like Motilal Oswal for your financial benefit, and never forget to do your own research. That’s a winning mix for an investment decision. 

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account | Upcoming IPO

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