Here’s an old story that some of us have heard when we were children. A group of blind men want to know what an elephant is like and are taken to an elephant to figure its shape out for themselves. Each one touches a different part and thus gets a completely different idea of what the elephant is like. One touches its side and thinks the elephant is like a wall. Another one touches the trunk and thinks it to be like a snake. The one who touches the tail thinks that the elephant to be like a rope and the ears were like a fan and the tusks like spears and the legs like tree trunks and so on and so forth. The moral of the story is obvious. In some versions of this story the blind men become violent over their differences and beat each other up. The story is used to indicate that reality may be viewed differently depending upon one’s perspective. The problem, of course, is not the blind men are all wrong but they are all correct, but only partially so.

When the stock markets have fall sharply, losing about 5 per cent over five trading days. Newspapers and on TV channels, there are any number of blind men offering opinions about the elephant in the stock markets. Here are some of the more popular reasons. Worried about inflation and under pressure, the government will reduce duties on X and/or forbid the exports of Y and/or ban futures trading in Z and/or increase capital gains tax (either short-term or long-term) and/or an increase in the Securities Trading Tax and lots more.

All of it sounds like reasonable fears and any one could come true. In recent months, generally when I talked to big investors they seemed to be hunting for reasons to justify the rise in stocks. Now, they are desperately hunting for reasons to prove that stocks are going to fall. At the end of the day, the fact remains that after years of booming stock prices, everyone is nervous and knows that there will some kind of a correction and would like it be over and done with as quickly as possible.
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These blind men, the ones we are listening to now, are shouting at the top of their voices and there are multitudes who believe that the blind men can actually see the whole elephant. The real problem is that there is now a huge army of pundits who are professionally committed to explaining each hiccup in the markets by touching whatever part of the elephant they feel they are experts in.

One version of this story I found on the net has a twist. A clever man comes along when the blind are fighting and says that the elephant is a great tree, and on this tree grow leaves like great fans to give most wondrous shade and fan the breeze. And the branches of this tree are like spears to protect it. Unfortunately, it is hidden behind a great Wall, which is why it was not discovered until this very day. It cannot be reached by normal means. The expert then charges the blind for telling them what the elephant is really like and makes a neat bundle of money. The moral of the story is that anyone can describe an elephant to blind men but only some can make money out of it.

I‘ve resolved to not even try to find the elephant. All I’m going to do is to keep sniffing the air to make sure that I avoid the big stinking pile of you-know-what, whether of the elephant or of another animal traditionally associated with the stock market.

If you’ve never invested in stocks before and are about to buy some for the first time, you should understand what to look for and what factors to consider when selecting a stockbroker. It can be a good idea to use a stockbroker for an active management of your stocks or mutual fund portfolio. Most investors will use a stockbroker at one time or another.

First of all, what is a stockbroker? Well, I’m not really sure… …just kidding. A stockbroker is an intermediary between you and the stock market, which is an exchange where shares of stock in public companies are openly traded. When you buy or sell a stock, also known as a “security,” you must place the order through a broker, who then transacts your business by placing the order on the market.

I personally use a discount broker only to carry out my order, I am willing to listen to a full-service broker’s story but in the end invariably the decision is mine. If you have done your homework, trust me a broker doesn’t know much more than you.

A discount broker is someone who gives you zero advice, and just executes your market orders for you, but does nothing else. Therefore, a discount broker usually doesn’t collect commissions. Instead, they usually charge a flat annual fee and are paid a salary. Internet brokers such as Etrade or Ameritrade are discount brokers that work on commission. They allow you to place your market orders online, and the website itself is the broker. Internet brokers usually charge a much smaller commission than anyone else.

If you use the services of your bank there are some facts to consider. When you talk about the options you have to invest your money, they will certainly recommend the funds they control themselves. Do they recommend other banks portfolios? I don’t think so. If you go to a car dealer that sell Ford, do they recommend you to buy a Lexus?

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So, be careful when selecting your broker. If you hire a full-service broker, make sure it’s someone who works for or is associated with a reputable brokerage house, and make sure that the broker understands that you are aware of the fact that they make money every time a trade is executed. In this manner, they’re less likely to eat away at your capital unnecessarily, because they’ll know upfront that you’re hip to their game. If you know what stock you want to buy and are a small investor, it’s best to go with a discount broker, because they don’t receive commissions. and therefore won’t persuade you to place superfluous trades.

There are the authorities though to help the customer out. And there are rules and regulations about the way stockbrokers can and shall work. Depending on in which country you are investing the rules can vary. In some countries stockbrokers can have his own portfolio and the company where he works can also have a portfolio of shares. Imagine a fund manager being allowed to invest in the fund he manages, he is likely to overlook the interests of his client.

This makes an eventual conflict arise whenever something special happens. There are numerous customers that suspect that they have been recommended shares in companies that will face problems and where the stockbroker wants to sell his own shares before the market drops.

Stockbrokers in general are behaving in a professional way and realize that their business will benefit most if the outcome for their customers are great. As a customer you are advised to check the results that a stockbroker have produced, trace their records. Do not look at the advertisements, the truth about the results are not there.

Picking a broker shouldn’t be about price alone. Be honest with yourself about how much help you can use and go with the broker who can fill in any gaps in your knowledge and experience. Together, you could make a better investing team.