Lars,
One last point, re: your post about the need for monitoring, etc.
If your investment objective is to buy a few solid stocks, lets say Johnson & Johnson, Merck, and Microsoft, and hold them for 5-10 years, then you probably don't need a full-service broker. In fact, they actually discourage this, through the annual "inactivity fees" they levy on your account.
IMO, the person who needs a full service broker is someone whose objective is aggressive growth. Lets say you have a portfolio of 5-7 Nasdaq-listed speculative growth stocks. One of your stocks, XYZ Computer, comes out with a disappointing earnings release. Do you want to:
a) Find out the stock tanked 5 points after the earnings release and wonder what the heck is going on; or
b.) Get a call from your broker minutes after the release, telling you about the earnings release, and what he thinks the outlook is for the stock. Then a few hours later, get another call from broker, telling you that he listened to the earnings release conference call, and followed up with calls to a couple of analysts that follow the stock to get their read on the outlook, then made another call to CEO of XYZ where CEO relayed his thoughts to your broker. Your broker then has the tools to intelligently evaluate whether you should dump the stock, hold it, or buy more on the dip.
Certainly, I am not saying that all brokers do this, but I know a lot of them that do. The ability to speak to CEO's, CFO's, portfolio mgrs, and analysts about a stock is priceless. When I talk to these guys, I'm not trying to say they give me inside information (which they don't), but they do provide some great insight into what is going on with the company--stuff that you don't see in a press release. Things like "we're presenting in two weeks at a major investment conference in NY," or "I've spoken with a couple of analysts recently who have indicated that they are interested in covering our stock," or "the reason our earnings were off is because we had a couple of orders that didn't ship last quarter, but will be shipped this quarter," or "we think we can get approval on this product in the next 3 months..." How many times have we sold a stock, only to see it go up later on an ongoing development, and say "Geez, if I'd have known that, I would've kept it..." Or how many times have we bought a stock based on an upcoming event, such as a company about to open a new casino, only to see the stock drop after the casino opens because the opening was already factored into the stock price.
These are illustrations of how a broker can provide "value-added" services to the client. And that doesn't mean that the broker is always right, even after doing all of the leg work--I can tell you plenty of stories about stocks I fell in love with that never worked out. But all-in-all, I think that doing the extra legwork makes a big difference in the portfolio performance. |
