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What should I do if my broker suggests an exotic investment?

If the investment is too difficult for you to understand, do not invest your money.

What factors should I consider when choosing a broker or firm in which to invest my money?

Some of the most important considerations include: the training and education of your broker; the fees or commissions on trades, both buying and selling; your broker's track record of performance, especially how well he does during both up and down markets; the firm's reputation; whether there have been any official complaints against the firm; whether the firm is solvent; whether the firm trades directly in the markets; and whether the firm is legitimate.

Does a stockbroker make money on the stocks he directs me to buy?

Stockbrokers are compensated in many ways to direct clients to purchase stocks—they receive commissions, bonuses, even gifts and vacation travel as incentives to purchase and sell stocks. You should ask exactly how your potential broker receives compensation for your trades.

What kind of research do I need to do before investing?

There are hundreds of ways to analyze stocks, but looking at very basic information about a company in several areas is a good way to start. These areas include analyzing a company's financial picture, especially its ability to generate profits consistently, its assets, its debt, and its obligations. You may also look at external factors, such as the company's market, how the company compares to its competitors, past stock performance, and the company's ability to create products or services in high demand.

What are the different distinctions between stockbrokers?

Stockbrokers are generally divided into two categories: regular brokers, who have relationships directly with investor clients; and stockbroker-resellers, who may represent larger brokers and investment companies. Since resellers may be compensated by some of the firms they represent, you should work directly with a regular broker.

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