Is Wall Street out to get you?

Have the movies and the media convinced you that danger lurks around every corner on Wall Street?

 

If so, I could not fault you. My recent reading of “Liar’s Poker” and “Barbarians at the Gate”, along with seeing the movie “Wolf of Wall Street”, reminded me of the bleak picture painted of Wall Street stockbrokers and hedge fund managers who siphoned off millions of dollars from shareholders. Though abhorrent, how much could these behaviors hurt your financial plan?

By taking a smart approach, you can shield yourself from letting a rotten apple spoil your financial future. While regulators and lawyers work to expose the criminals, you can take concrete steps to make sure the next Bernie Madoff does not leave you destitute:

  • Your adviser should not hold (“custody”) your money. Your funds should be held with a “third-party custodian” – a company that is not affiliated or owned by the adviser. For most of my clients, TradePMR holds their funds and I make the investment decisions. At any time, the TradePMR website can show them their holdings without my involvement. Fidelity, Schwab, and others work with advisers to service clients as well.
  • Steer clear of exotic investments. Private placements, “pre-IPO” stocks, and non-traded securities can sound exciting and promise high returns. However, most take considerable risks, and are much harder to understand than mutual funds, ETFs, and stocks. Unless you have $5 million or more, stick with traditional investments and leave the “excitement” for someone else.
  • Trust your instincts. If a promise sounds too good to be true, ask more questions. Get a second opinion from a knowledgeable third party who is not paid to sell you the investment!

The fear generated by these stories may be a good way to sell magazines or movie scripts, but it should not prevent you from making prudent investments for your future!

If you have concerns about an investment, I would be happy to give you a second opinion at no cost. Please share this offer with those that you know and care about!