Its 2014. Why do individual investors still use a broker or portfolio manager?

Discussion in 'Online Brokers' started by Alejandri, Nov 2, 2014.

  1. Alejandri

    Alejandri Member

    Joined:
    Feb 2014
    Posts:
    9
    Likes Received:
    0
    Several of my friends are brokers, and you cant ask this question without upsetting them, so, I turn to the fine folks on reddit for this one. I understand that brokers can give one access to IPOs that they may not otherwise have access to. I also understand that people think brokers are "experts" at what they do, but there is tons of evidence to support otherwise, although every broker seems to think they can beat the market.

    Here are my thoughts: - We know that, including transaction costs, its basically impossible to beat the market.


    • Its documented that IPOs under perform the market, which makes sense, because if you are the owner of a company, you'd naturally choose to IPO at a time when the value of your company is highest. Everyone wants to buy the next Google at IPO, but overall IPOs underperform the index and this is documented.
    • Employing a broker will take commissions regardless if they underperform, meet the market, or underperform. So, given this, why do people choose to have a broker put them in generally more risky stocks, when it seems to me that it would be both more prudent and intelligent to pick a market ETF like SPY, which just tracks the S&P500, or some other index, for their entire portfolio? Or, a basket of ETFs that track the overall index.
    • Its easy to fund a discount brokerage account, buy and sell stocks, find information about said companies online. In fact, its never been easier to do these things for yourself; things that, in the 80s, you needed a broker for.
    So I ask you, why is it that in 2014, individuals are still using portfolio managers and brokers to manage their individual portfolio?
     
  2. JR Ewing

    JR Ewing Super Moderator Staff Member

    Joined:
    Feb 2014
    Posts:
    4,950
    Likes Received:
    39
    People with real money need professionals - investing for income, tax & gifting, estate issues, etc.

    Many smaller investors who don't have the time, temperament, aptitude, etc should consider investing with a professional as well. Fear, greed, and ego have killed many a nestegg.

    Someone who is pretty sharp, able to keep their emotions in check, and able to spend the time doing their own research can probably do fine with their thousands or tens of thousands in a discount brokerage account.
     
  3. springbreeze

    springbreeze Well-Known Member

    Joined:
    Jul 2014
    Posts:
    111
    Likes Received:
    0
    For the same reason they've been using them all along, it's easier and quicker - no studying, no watching, no anything needed but the transferring of money.

    It's no different than you hiring a real-estate agent to narrow housing choices, or hiring a doctor to find the right medication for your symptoms, or searching a travel site to find the best hotels and flights for your needs and budget. We all fall into this trap one way or another to save time.
     
  4. troutski

    troutski Guest

    Joined:
    Jul 2014
    Posts:
    256
    Likes Received:
    1
    Using a portfolio manager is a worthwhile endeavor for investors with a lot of money, and sometimes even those that don't have a ton of money. I've never used one myself, but I don't exactly invest tons of money and I've been doing all right on my own so far. Things get a lot more complicated when you start investing higher sums of money, though.
     
  5. cameronpalte

    cameronpalte Well-Known Member

    Joined:
    Jun 2014
    Posts:
    81
    Likes Received:
    0
    I don't know why individuals still use a broker - I personally only use online traders and it works great for me.
     
  6. Investingpotato4

    Investingpotato4 New Member

    Joined:
    Nov 2014
    Posts:
    3
    Likes Received:
    0
    It takes the work out of doing research for yourself. Many older or uneducated people will go to a broker or portfolio manager because they want some sort of guidance. Its not a bad thing some people are just really careful with their money.
     
  7. richc3

    richc3 Senior Investor

    Joined:
    Jun 2014
    Posts:
    98
    Likes Received:
    0
    You'd be surprised how many people would willingly opt to shed responsibility to someone else. Also, quite a few people are essentially intimidated by how complicated the markets can be as they don't always follow conventional logic -- why not differ the task of sorting that out to someone else?

    That all said, and speaking purely for myself, I don't believe I could ever hand my money to someone and say "do as you please" with it. Whether I succeed or fail, at least I'm accountable to myself.
     
  8. Gelsemium

    Gelsemium Senior Investor

    Joined:
    Apr 2014
    Posts:
    937
    Likes Received:
    2
    If we have a big amount of money the hand of a professional can work miracles. I do wonder if those professionals handling big amounts of money can't simply disappear...
     
  9. dianethare

    dianethare Senior Investor

    Joined:
    May 2014
    Posts:
    987
    Likes Received:
    9
    I agree with you on this...early next year i want to start serious investing Godwilling and i don't know which path to take...definitely i'll have to look for a broker or portfolio manager to guide me through, once i learn the ropes am on my own :)
     
  10. shilpa123

    shilpa123 Banned

    Joined:
    Aug 2014
    Posts:
    373
    Likes Received:
    0
    I do plan to invest quite soon and I believe it is quite useful if you do it in the the right manner. I hope I start doing it very soon after making enough cash for myself.
     

Share This Page