What a stock broker is supposed to do for you

Most Americans don’t know much about the stock market. Sure, they understand that if they want to retire one day and live comfortably,  investing in stocks is a good way to have enough money when they’re finished working. But they don’t truly understand how the market fluctuates and how they should be investing their money. It’s the reason finding a trustworthy stock broker is so important.

A good stock broker will sit down with you when you decide to start investing money, find out how you want to invest and what you’re investing for and then create a plan that ultimately works for your specific situation. But recently, the stock market has become a scary place—and not just because of the sinking American economy. There are also plenty of stock brokers looking to rip you off and make bad investments in order to help themselves. You need to understand how to know when you’re being taken for a ride. Continue reading to find out some of the signs.

How a stock broker should be helping you

Quite simply, a stock broker is supposed to be able to read the market and help you buy shares of stock in different companies. As a stock holder, you essentially own a small percentage of the companies you are investing in. Over time, the value of your stock will go up or down, depending on a variety of factors surrounding each individual company. A good stock broker helps maximize the money you invest by buying up stocks that increase in value and deliver you a profit. As with any job, there are good and bad stock brokers, but there are also dishonest stock brokers who will not just do a poor job investing your money—they’ll do it intentionally to help themselves make money.

How Wall Street has changed

Think stock brokers are greedy? Acclaimed filmmaker Michael Moore does and he is currently working on a movie called Better Watch Out about the troubles on Wall Street. In this film, he’ll be exposing why many regular people like yourself are losing out as a result of some of the people in power in New York City. This clip talks about the film.

Video: Wall Street Better Watch Out for Michael Moore

How your stock broker could be ripping you off

There are plenty of ways for a stock broker to rip you off and steal your money. It’s impossible to be able to spot them all but here are some of the most common ones:

A stock broker who constantly makes commission-generating recommendations that go against your best wishes: There is a term on Wall Street known as churning that basically involves a broker who constantly advises you to buy or sell stocks. When you do buy or sell, brokers collect commissions (usually somewhere around 2%) off your transaction. So by consistently recommending that you buy or sell, they’re essentially skimming money off the top for themselves and giving you the impression that they’re really helping you. In order to avoid this, sit down with your broker before you make any investments and have them create a long-term plan for you. In some cases, buying and selling can be beneficial for you. But by having them map out a plan, you can question their moves and easily see whether or not what they’re recommending is best for you.

A stock broker who sells you improper or risky investments: Every year, millions of elderly Americans become the victims of greedy stock brokers who promise large returns on investments. But they’re not the only ones getting victimized anymore. When it comes to working with a broker, you need to keep the lines of communication open and understand why they’re investing in certain stocks. A good broker will walk you through the process, explain any risk involved and then allow you to make your decision. But they’ll warn you about the investments and be forthright with any and all information.

A stock broker who tries selling you a dream: There is really no such thing as a sure-thing on the stock market. Everything is an investment. So be wary of investors who try to make something sound too good to be true. You should also do some research on your own to find out about any stock that he or she recommends.

A stock broker buys or sells stock without your permission: You may think that your broker has your best interests at heart, and he or she may explain why the transaction occurred. It may even benefit you in the long run. But a broker is not allowed to make any stock trades without your permission.

When buying stocks goes terribly wrong

Most newcomers to the world of buying and selling stocks are intimidated by the market. And while they shouldn’t be too worried about the market collapsing, it has happened! This PBS documentary explains how it happened in 1929. It’s just one of the many reasons you need to know what you’re doing when it comes to working with stocks.

Video: Stock Market Crash 1929
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Taking action with an investment fraud lawyer

If you feel as though you have been victimized by your stock broker or ripped off in any way, you need to take action right away. It’s important to remember that you cannot simply claim fraud because you lost money on the stock market. But if you feel as though you have a legit claim against your broker, contact an investment fraud lawyer in your area as soon as possible. In most cases, that lawyer will then do research to find out if other investors have filed similar complaints against a stock broker. A class action lawsuit can then be brought up against the broker you worked with on your investments.

Buying stock on your own

Unless you understand the stock market, you should always consider using a stock broker when you decide to invest. However, if you do choose to buy stock on your own, it’s not hard to get started. These days, there are plenty of online sites that allow you to deposit money into an account and buy and sell stocks at your convenience. You can also buy stock directly through some companies and buy and sell them as you please or use an option like a dividend reinvestment plan (also known as a DRIP) to add to your investment portfolio directly through a company. But regardless of what option you choose, you need to be careful as you invest money into the stock market.