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The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails by Steven M. Sears

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Appeals to Common Sense

Not all brokers are bad. Many stockbrokers are very good. When you find a very good stockbroker, stay loyal. Refer friends and family to them. They work hard, and deserve to be paid well. Most people never get near those types of stockbrokers because their accounts are too small, or they have rotten luck. Most people get stockbrokers who are often trying to sell, sell, and sell. The most dangerous and disingenuous of the lot make common sense appeals that seem logical, but are not always straightforward. Common sense sales appeals always have a whiff of truth. A common ploy is to liken declines in the stock market to sales at department stores. That’s a good point, of course, but it leaves out the most important point that the stockbroker usually did not tell the client to sell some or all of his holdings before the crash. The stockbroker would rather the client invest even more money because, after all, as the stockbroker may note, it pays to own stocks for the long-term. Of course, that may be true, but perhaps only for people who live for 100 years and never need access to their money. Naturally, the conversations rarely touch upon matters of risk and loss. The conversations can even be manipulative, or ignore difficult market facts like diversification is supposedly the antidote to risk, but correlation is the enemy.

Consider this from an e-mail received in the midst of the credit crisis in 2007. “We as investors have been lied to over and over again,” ...

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