Advisors and Techniques

It's one thing to self-insure and act as your own investment adviser with just a small sum riding in the stock market. It's another thing to try this risky business when you have all your shirt and sock money tied up in securities. One rule of thumb says that a businessman or professional with £40,000 or £50,000 or more invested in a mixed securities portfolio needs to spend an hour a day acting as his own portfolio supervisor - if he expects to take full advantage of all chances that the stock market offers. This holds true if a portfolio is what it should be: a package plan for maximum benefit. So goes the rule of thumb.

The hour-a-day rule is overblown, of course. A conservative investor might get by with an hour a week. But ask yourself: Have you an hour a week to spend sweating over your investments, let alone an hour a day? And even if you have the time - do you know just what kind of sweating to do? Do you know enough about Wall Street? Many professional advisers don't know enough, and you'll save many a pound if you merely keep this basic fact in mind.

So it's smart to review the sources of investment advice. And there is no better place to start than at the door of the brokerage house. Behind this door lurk a lot of possible benefit - and a lot of possible trouble. But keep a balanced view.

Don't swear at your broker for everything.

One of the top sports these days is swear at-your-broker. "There are plenty of investors who, when they do well, go to lunch and boast about their own acumen," says one Wall Street pro. "But when they do badly, they go to the broker's office and raise hell."

But before bragging - or raising hell - an investor would be wise to set aside an hour or so for a probing review of his stockbroker relations. This is smart procedure even if you use your broker only occasionally for advice and information. And it makes lots of sense if you're fearful of your portfolio's performance in the coming year.

A key point to remember: It's not always the broker who's neglectful of the account - just as often it can be the investor. There are, of course, careless and incompetent registered representatives. Says the head of a large carriage-trade brokerage: "Every office has its `churnee - the registered rep who will try to stir up buys and sells just for bigger commissions. It's the manager's job to spot him."

But some investors contribute to the "churning" of their own accounts. Do you? Those most likely to demand unneeded action, and suffer as a consequence, are investors who (1) persist in jumping from broker to broker and (2) those who have little experience in the market. For these, one point is essential: Take time to get a clear view of your investment objectives.

But relations with brokers can turn sour even for those who believe they have a clear notion of their aims in the market. Some who have been in the market for years will fail to tell their brokers of changing goals for investment - caused perhaps by a death, marriage, or inheritance.

Others can easily confuse their brokers. "A blue-chip man will get restive and want to take a flyer or two," says one brokerage house manager. "After a while the rep won't know where his client wants to go." For this breed, one piece of advice is: Set aside 10 or 15% of your account for flyers - and make sure your broker clearly understands this.

More damning of brokers arises because the market's rumour mills have been grinding faster than ever in the last few years. "Rumours are running double what they were in 2005," says a broker. "People seem more desperate for good information than ever. They'll ask a broker for information on a stock - and then ignore it."

In a general review of your broker relations, let your registered rep know what you're reading in the way of market information. Some market and investment letters remain a menace despite efforts by the SEC to curb their publishers. If you lack this kind of confidence in your broker - then maybe you need a new man, or some other form of investment advice.

As an investor, you have a basic responsibility that can't be delegated: knowing what's going on. This theme is pushed hard by informed Wall Street people. Says an executive in a top brokerage house: "If you have, for example, £60,000 or £70,000 in a mixed portfolio, and can't spend a minimum amount of time studying the market - you shouldn't have an account with a broker." You should, he adds, have a good investment advisory service, or a mutual fund.

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Job Pressure

Then there is the question of job pressure. Most businessmen - particularly corporate executives - operate in an atmosphere of emotional pressure. Indeed, emotional pressure, however trite that may sound, is a built-in part of the system. It is one of the screw-cans of oil that makes the system work. And despite what some junior executives and middle managers think of the men at the top, the pressures of business don't let up an iota as a man climbs higher on the ladder.

The truth is that the first-rate manager in business, from the junior with his bushy tail to the middle man with his tail down to the chief executive officer, is not under stress by pure chance or misfortune. He asks for... see: Job Pressure