Making the decision to invest your hard-earned money with a brokerage is a difficult one and you want to make sure that your broker is reliable and really knows the trading business inside and out. After all, this is money that you will need for your retirement years and you want to be as cautious as possible. There are several questions that you need to ask your broker before you start trading, but we will just talk about five here.
Ask your broker what kind of training and certification he or she has. There are brokers who do not have the knowledge and skills needed to provide you with the excellent investment advice that you need to keep your money safe and growing.
If your broker is trying to sell you on investing in an “in house” product, you need to ask for the product history. Before you do any trading, it is critical to do your research well and find out how well the product has been doing on the market.
Ask your broker if the brokerage firm is underwriting any product that you are considering for investment. Sometimes brokerages contract with other firms to sell their products, receiving a commission for the products that they can sell to their investment clients. These products are not always good investments, many times simply being dumped on the public without having any predictable gains. Protect yourself by asking questions.
This is a question you will want to ask if the stock or bond you are thinking of trading is being arranged through a bank or savings and loan. It is important for you, as an investor, to know that investing through a bank does not guarantee that FDIC will cover your investment, so it might be hard to recoup your investment if the institution goes under.
This is an important question to ask because any commission your broker receives can have an effect on you. Sometimes brokerages collaborate with others, like life insurance, which pay large commissions for any investments made by you. Sometimes, if an investment is a hard sell, brokerages are offered huge incentives to sell it, with the end result being that it is passed on to you whether or not it is a good investment.
Overall, make sure you ask these questions before trading!