Top 5 Reasons You Should Never Buy Stocks From A Stock Broker

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September 15, 2021

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It’s time to cut those final ties to Wall Street. Unfortunately, even those that claim to “have your back,” really might just be using you to scratch their own.

What really lies behind the “expertise” of a stockbroker, is ironically nonsensical. Especially when you consider the following.

Let’s get started…

Tip 1: Let’s Get Physical

If you remember physics class you’ll recall Isaac Newton’s law of inertia. Objects in motion tend to stay in motion. And it’ll keep it’s motion unless an outside force provides enough resistance to stop it.

It’s the same way with stocks, hence the term ‘momentum stocks’ that keep on moving in a direction due to the inertia it has built up.

These are stocks that have high returns over a short time frame and possess the capacity to keep snowballing up in price as more and more buyers buy.

Now…

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1. The Nature of the Beast

It’s easy to attack Wall Street as a whole. There’s no need for a magnifying glass to spot corruption in the “big banks” or “major corporations.” Those abuses lie in plain sight. Not to mention, they’re regularly brought to your attention via the news.

What’s harder to see are the mechanics behind the corruption. To see that, you’ll need to take a closer look.This deeper dive is important because it exposes you to the rot that lies at the foundation of the financial system itself.

But be warned, it’s ugly.

One root cause of corruption rears its head in the form of a stockbroker. Moreover, in the form of how a stockbroker gets paid. When you understand the nature of how stockbrokers are incentivized to behave, you’ll start to see the underlying problem. But don’t worry, the math is simple.

Stockbroker = Salesperson

That’s right, stockbrokers work in sales. And they are compensated based on the trades you make. Whether you’re using a discount broker or full-service broker, you’re subjected to trading fees.

These “trading fees” are really commission payments paid to a stockbroker for clicking a button on your behalf. They have the ability to make this commission on every one of your trades.This can incentivize brokers to keep you trading even if you shouldn’t be. That’s because the commission allows them to earn even if you aren’t.

And the questionable compensation doesn’t stop there…


2. They’re in the “Fees,” Man

Another thing you can bank on, or at least they can bank on, is the fees not stopping at the trades. When using a stockbroker, the fees are just getting started.

You’re going to be hit with all sorts of “micro” fees that eat away at your returns. These act like vicious Piranhas nibbling away at your gains.

Here’s a breakdown of some of the bites you may experience:

  • Maintenance fees: Here, you’re charged fees for simply maintaining an account. Not only are you charged on each of your trades, but also on your ability to even make those trades.
  • Inactivity fees: Thought you could dodge some fees by being less active? Nope! You can literally get charged for doing nothing. Many brokers charge a fee simply if you stop trading altogether for a long period of time.
  • Total Assets Under Management Fee: Full-service brokers often receive a small-percentage of the worth of your entire portfolio. This is “good” in the sense that there’s a direct incentive for the broker to help you perform well. But don’t be misled by the seemingly “small amount” they take off the top.

Let’s say a broker charges a 2% total assets under management fee. This 2% may seem like a fair trade in the short-run, as it won’t cost you a ton in that time frame. But in the long-run, the effects can be devastating. Here’s some more math to show you.

Strap in apes, this one’s going to hurt…

Example

If you invested $10,000 initially into a mutual fund your broker recommended and contributed $100 a month to it for 20 years and it earned a 9% return that compounded annually, you’d have $117,436.25.

But if all of those numbers stayed exactly the same, but you lessened the return from 9% to 7% each year (i.e. like the 2% total asset management fee),

You know what you’d make instead? $87,891.44.

That’s right, that 2% would cost you nearly $30,000 when all is said and done. That 2% just became 25%.


3. High Entry Barriers

The above example may have also shocked you with its figurative numbers. An initial investment of $10,000 certainly isn’t within everyone’s reach.

Which brings us to our next reason…

Stockbrokers often require a minimum deposit to start trading stocks with them. While some start at only a few hundred dollars, others can require a few thousand. In fact, there isn’t a formal ceiling to this “minimum” requirement. It can easily extend into the tens of thousands and beyond.

No wonder there’s an attitude that only the rich get richer…

But that’s an attitude we don’t tolerate. And it’s an ideology of the past. But, nevertheless, it’s still a barrier of investing that many face when trying to get involved in the traditional system.

Brokers can make it seem like a necessary price to pay. Afterall, with their “expertise” — there’s that word again — that upfront cost will be more than made up for with superior returns.

But are you really outperforming the traditional market using a broker?

We’re afraid, it’s not looking likely…

4. There’s Not Much of an “Edge” In The Hedge

The centralized stock market’s performance can be measured by a market index. You’ve probably heard a few of their names in passing. Some examples include the S&P 500, DJIA, and the NASDAQ.

Ring a bell?

Well, investors are actually able to invest in funds on their own that track these indexes. They’re referred to as index funds. Index funds are a type of mutual fund or exchange traded fund (ETF).

There are two main reasons why shrewd, traditional investors choose to do this. One, index funds are incredibly low-cost from a fee standpoint. And two, they tend to outperform a substantial amount of the mutual funds and hedge funds handcrafted by professionals.

The wise ETF alternative is now morphing its way into decentralized finance. It shows up as an exchange traded portfolio (ETP). You can learn more about those here.

The point is, in many cases, the guidance you’re provided with from professionals often doesn’t fare better than the market’s own performance. So, what are you paying all that money for? Where’s the edge given?

The truth is, there rarely is one for the standard investor, even when working with the “pros.”

You’re better off distancing yourself from Wall Street, and embracing independence. But imagine going a step further. Leaving not only a traditional broker, but the traditional market itself, behind. Entering a place where you’re no longer independent, but part of a like-minded community.

Well, imagine no longer.

You’re not bound by traditional brokers or the markets they dominate.

5. There’s A WAAAAAAY Better Alternative

WSBDapp was founded along these very concerns. As a decentralized autonomous organization, we’ve devoted ourselves to exposing the corruption inside the centralized finance system. One where there are incentives from the ground up to work in opposition to smaller, outside investors.

But we realize that exposing investors to unethical compensation practices, hidden fees, elitist entry barriers, and sub-standard performance isn’t enough. We needed to provide an alternative for the new, ethical class of modern-day investors.

And that’s exactly what we’ve done.

The WSBDApp allows investors to begin taking part in the ground-breaking approach to the markets with no minimum deposit necessary. There are no brokers, and there are no hidden fees. What there is, however, is an entire community eager to lift you up.

And one eager to bring corrupt practices down…

Don’t miss out on the financial revolution that’s shaking the ground beneath our feet. Head over to WSBDApp, get your WSB tokens, and start making plays on the revolutionary markets of synthetics stocks and ETPs.

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