3 Words You Won’t Hear From Your Broker
This are some thought-provoking words from Daniel Solin – one of my favorite bloggers. Bottom line – consider the advice you receive very carefully.
Shortly before Facebook’s IPO on May 18, 2012, I received a call from a reader of my books. Her broker had just called her with great news. He was able to get her a small allocation of Facebook stock. She wanted to know if she should buy and then could “flip it and make a profit.”
In response to my questions, she told me she was a struggling single mom, who lived paycheck to paycheck. She had a small 401(k) account and modest savings. She was hoping I would say “yes,” because “the profits would be really meaningful to me and my kids.”
She was very disappointed in my advice. I recommended against the purchase. I told her I had no idea whether Facebook would take off or tank. There certainly was the chance she would be giving up the possibility of big gains, but there was also the specter of large losses. My bottom line was that she could not afford the risk.