Do You Need A Broker?

Carolyn M. Brown

York City. “However, many dubs do a great job at choosing which stocks to buy,” she says, “but they will overreact to rumors or stock fluctuations and sell a stock [sometimes at bargain basement prices] when they should hold on to it.” Thompson works with three investment clubs, one of which consists of investors all in their 20s. “A full-service broker can help guide your club,” she advises.

In your search for a full-service broker, find someone who has worked with investment dubs before and understands the general philosophy and inner workings of these investor groups. You want someone who will take the time to listen to fellow club members, attend meetings and educate club members on the ins and outs of investing.

Brokers should have “a high level of patience in working with investment clubs,” says Walter L. Clark, vice president of investments with Gruntal & Co. in Baltimore, and understand that their job is to help your club achieve its overall goals. “Some brokers try to take over, others are very passive. You don’t want either of these,” says Clark, who is an advisor to the Washington Women’s Investment Club. “You want someone who knows how to make recommendations but allows members to pick their own stocks.”

Indeed, investors should deride which stocks to buy or sell. The broker is there to provide information on the stock, carry out the transaction and educate members about the market and certain industries. To find a broker, get referrals from other dubs or from NAIC regional council presidents.

Once you choose a broker, make sure that authorization is given to designated dub members who will be placing buy/sell orders. All members must sign an agreement when the account is opened. The financial officer should be responsible for sending checks to the broker.

Pay on time. If the money doesn’t reach the firm three days after the buy order, your dub may be fined or penalized and put on a restricted list. In other words, you’ll have to pay upfront before the broker can accept any of your club’s orders.

Next month, BE will offer some advice on running meetings and tracking your investments.

To obtain back issues containing other parts of this series, please call our circulation department at 212-886-9568.

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