AABP Award 728x90

Seek a broker with experience


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Dear Mr. Berko:

I’m 66 years old, and I retired at 59 with $682,000 in a rollover Individual Retirement Account (IRA), now worth $417,000. My wife and I take out $1,000 per month to supplement our two pensions. But in the last year, we stopped taking money from this account because it has done so badly.

We’ve had two brokers in the last seven years, both nice young men who use their companies’ research to manage my IRA. Their advice was terrible from the beginning. For the past 13 months, I’ve been managing my IRA but doing no better than the two stockbrokers before me. My only successes were the bank preferred stocks you recommended last year, most of which have doubled. And though I’m getting 15 percent to 18 percent interest, I only invested $33,000 because I was unsure and nervous about buying them. I also bought some stocks from your list of 20 low-priced issues, which have done well, too.

I’m about 80 percent cash and don’t know what to do. I feel I may have missed the market, and the money market funds and CDs pay so little. Frankly, I’m afraid to invest and afraid not to invest. The newest broker who wants to manage my account thinks that I should invest half my money in real estate investment trusts and the other half in energy stocks. What do you think of this portfolio management plan? It seems to make sense to me. What do you think I should do with my portfolio?

G.S., Kankakee, Ill.

Dear G.S.:

I think that new broker’s advice “sphinx.” That’s not account management; that’s gambling and guessing. Now, I can’t tell you how to position your account, because I don’t know a darn thing about you. What is your risk tolerance? What are your income sources, and how secure are they? What are your specific assets and their values? What are your short- and long-term goals? Are you and your spouse healthy? What are your debts (home, credit card, personal loans, etc.) and other personal obligations? Do you wish to leave assets to your children (if you have children), relatives, charities, etc.?

Looking at your request another way — if you want to build a home, you gotta tell the builder how you wish to live in it.

Meanwhile, your fear is too common. Today, especially today, many investors are like deer frozen in a car’s headlights: paralyzed by fright and afraid to jump left or right, dreading that any decision may be the wrong decision. That’s understandable.

And it’s unsettling for folks like you who must rely on a young stockbroker who has been in the business less than 10 years, who may not have $20,000 in his IRA, who may be above his shoulders in credit card debt, who has three kids in school, who is paying $1,500 a month for two auto leases and who has a working wife to help meet family financial obligations. Relying on the average stockbroker with this common background is like asking a blind man to perform an emergency appendectomy.

Many brokers may be adequately trained, which is fine if you would be satisfied with adequate advice. But if you want more than adequate advice, you need a professional who is closer to your age, with whom you can identify and who can understand where you’re coming from and where you need to be. So you need a professional money manager who has been in this business for decades, whose maturity can give you comfort and whose goals are similar to yours.

For most folks, going it alone, especially at your age and stage, can be frightening. And for lots of folks, going it alone at this point in their lives can be catastrophic to their financial health. You must employ an experienced money manager who has had decades of experience making portfolio decisions, a better-than-adequate track record and the ability to emotionally identify with you.

You must employ a professional manager who has a record of good judgment and must be mindful that good judgment comes from experience while knowing that experience often comes from bad judgment. This is not the time to depend upon amateurs to help you through the next 20 years. This is the time to depend on a professional whose years of past experience will provide the comfort, security and professional expertise you need for the coming 20 years.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, Fla. 33775 or e-mail him at mjberko@yahoo.com. © 2009 Creators.Com

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