Stalking the Winners- Stocks And Bonds Can Make Or Break Your Financial Health
Article 19 of 20: Online Share Trading
Stalking the Winners: Stocks and Bonds Can Make or Break Your Financial Health
Joanne M. Friedman
My first experience with the stock market was accidental. I was given a small number of shares as a college graduation present with no advice or suggestions appended. Young and uneducated in Wall Street’s workings, I put the certificate in my brand-new safety deposit box and walked away.
Years later, when maturity and poverty arrived simultaneously, it took some effort to find a broker willing to even talk to me. My blue chip shares had increased in value significantly, so it wasn’t a matter of small potatoes in a big-potato field; I was a woman and was greeted almost unanimously by the irritating “Have your husband call me, and we’ll see what we can do.” I had a husband, but the shares were mine, not his or ours. When I finally found a female broker who was as thrilled to find a playmate as I was to be one, information flooded in, and I sold some of my precious stock to buy high-interest corporate bonds. This was the mid seventies, and bond interest rates were topping out at a tooth-jarring 17.5%.
That’s when I learned the following rules:
- When bond interest rates rise, so do bond prices.
- High-interest bonds are subject to “calls”—the issuer can repay your original investment and take their bonds back, which screws with your income plans.
- Brokers—even nice lady brokers—will sell you whatever they have stashed in their “top drawer” without giving a thought to your best interests or how emotionally fragile you might be.
The top drawer is where brokers stick offerings that are handed to them by the senior broker or vice-president. They generally are of a type—like front-end loaded funds—that will bring quick income for the brokerage, not necessarily for the investor. I know this because I bought some of that stuff with the bond principle money.
Recognizing bad karma when I step in it, I fired my broker and went about picking my own stocks. For a year I kept a notebook with dozens of tiny tabs, one for each stock I was tracking. I had “insider information” on one stock—a friend of a friend of the cleaning lady who swept the vice-president’s office type of insider—and bought some, dreaming about wealth even while I watched the company sink and drown. I used logic on the next purchase, picking a company that dealt in waste disposal (that’s “garbage”). Everyone has garbage that needs disposal, so that seemed a solid choice. Apparently that particular company wasn’t very good at the garbage biz, as that stock tanked as soon as the paperwork came in the mail. I withdrew from the market to lick my wounds. In a spate of accidental wisdom, I chose not to sell any more of my blue chip stock.
It wasn’t until the advent of online investing that I jumped back into buying and selling securities. With access to the internet, I also have access to information, research, comparisons, opinions, SEC filings, charts, graphs and prospectuses that I never would have known about. I still make my own choices, but I’m better-informed. I also still had the remains of those original shares, which continued to increase in value.
Now when an investment tanks, I can actually watch it in real-time online. Not lucrative, but definitely cool. And I’ve done well overall. The speed of information transfer makes it possible for a moderately ignorant investor to make rational choices, and most online brokerages also offer professional help in the form of live brokers with whom you can discuss your decisions. The top drawer is still open, but competition is stiffer. Do your homework, and you will find the market less unnerving and more approachable. Gamble wisely, though. It’s your money, and it can disappear as quickly as it came.
