What Stockbrokers May Not Tell You (1)
January 24th, 2007 Ogbuotobo Chuks || chuks@stockmarketnigeria.com
By Ogbuotobo Chuks
One of the very interesting things you find in the capital market is that everybody wants to talk about one thing or the other. But there are certain things you don’t want a stockbroker to talk about. One of the things that he does not talk about is the fixed return. You hardly see a stockbroker who will tell you the fixed return on investment as you get in the money market. You hear most investors saying how much would you give me in three months time.
The broker does not mention this. A good stockbroker will never tell you precisely what return you are getting exactly like the money market. Because of migration of many investors from money market to capital market, they are used to going to the bank and asking for a particular return. But when it comes to capital market no stockbroker will mention that one. The reason is very obvious, in the capital market, who you are is irrelevant.
The market does not respect anybody. So, you may expect the market to behave this way but it behaves that way. No matter who you are, you may make one or two mistakes in this market, and because of that a stockbroker will never be able to tell you precisely what exact return you will get on so and so stock for a particular period.
There is another thing a stockbroker will never tell you. If you ask him to tell you the alpha of a particular security, that is a standard deviation of a particular security. Standard derivation means the variation in the swinging of a particular security up or down over a particular period. The reason is that if you know this, you know it all.
That is why if you ask a stockbroker what is the standard derivation of, let’s say First Bank, most of them would look at you that if you know to that extent you can take decision on the stock on your own. He may not want to tell you. A stockbroker does this to know the stock to buy or sell.
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It is nice to associate with this channel because of these revelations.Well all of us will be student of stockbroking so as to minimise our losses and maximise our profits.