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5 Point Checklist for Your Stock Market Professional

6 June 2006 - Features - Editor

Any licensed stock market broker should be good enough to look after the routine and accounting of your transaction decisions. A secretary should suffice to prepare summaries of long hours of reading and browsing for stock market information and opinions. However, you deserve more and better from a stock market professional, who is supposed to analyze relevant trends, put disconnected information together and to make sound recommendations to increase your wealth. Here are 5 top questions to ask and find out whether you have the best personal stock market professional around:

  • Does your stock market professional have top stochastic modeling skills? Time series data and past trend analyses are commonplace, but can lead to erroneous decisions in the fluidity of today’s global market interconnections. It is rare to find a stock market professional, who is able to relate discrete developments in the present, to make reasoned predictions of the future. A person who can write his or her own equations, and appreciate models developed by others will add value to your portfolio.

  • Do you and your stock market professional have expertise in the same domains? You do not want to reinvent the wheel, or to pay for a person to reinforce your own decision-making ability. Choose a stock market professional with direct line experience in at least one major industry of which you have no personal knowledge. Your combined insights will yield a significant advantage over most operators.

  • Does your stock market professional have networks different from yours? This is related to the point mentioned above. Industry equations tend to change, and a stock market professional who speaks from many years of experience, but without current contacts could feed you with stale information! You will not gain either, if both of you move in the same circles. Take time to find out which circles your stock market professional cultivates, and ask searching questions to make sure that the person truly has access to key contacts as claimed.

  • Be wary of insider information. This may appear contradictory at first sight to the previous point, but investors must distinguish between informal leads that have been validated by facts, and casual talk palmed off as informed advice. Stay away from stock market operators who fuel rumors, and indulge in transactions which are not entirely legal and above board.

  • Does your stock market professional use jargon you do not understand? Investment is a great area for continuing adult education! Many people in this business use terms, the definitions of which are not widely known and understood. Never feel diffident to ask for a link to a glossary or reference, to demand examples, and to tread carefully when conversations turn to shop talk which sounds a bit over your head.

  • It is ironic that stock market brokers, who can make enormous contributions to the personal wealth of each of their clients, are often reduced to clerical and wall flower roles! It is up to each investor to leverage the business relationship for top value, first by rational selection of such associates, and then by periodic review of the benefits realized. The latter rarely resides in numbers alone, as tidal moves in the macro environment can hide great swings in actual performance with respect to individual pieces if advice.

Selecting the right professional

Selecting the right professional to mange our money or advice us about investment decisions is a very important step for both the consumers and the professionals alike. While the amount of money to invest is an important consideration for both parties, another factor often overlooked but perhaps even more important to consider is the suitability of the investment and the expectations on both sides of the buy or sell transaction. Another important consideration is how the investment philosophies play out in any portfolio. Investors and stock professionals need to be diligent and careful before implementing any investment strategy to make sure that both parties understand the consequences of every decision whether it relate to stock selection, advice and trust.

 


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