The Ten Percent Solution

 

commissions. I saw very little of that while I was a broker. For the most part, I don't think that brokers' poor investment performance has anything to do with ethics. Picking stocks successfully is very difficult, and most of us just aren't capable of doing it. It's as simple as that. And, like I said earlier, most brokers are salespeople not investment advisors. The bottom line is, if brokers were really so smart, they wouldn't need clients."

"So, we should never use a broker," Tom summarized.

"We didn't say that," Roy clarified. "We said that you shouldn't invest your ten percent fund in common stocks on your own or with help from a broker. But there are a lot of fine brokers out there and, used properly, they can be a big help in achieving financial success."

"But what else does a broker do?" I asked.

"Many stockbrokers no longer specialize in stock trading but instead concentrate on offering a more well-rounded financial planning service to their clients—one that involves many of the products and concepts that we'll be discussing over the next several months."

"You want us to invest in ownership but not in common stocks. I guess that leaves real estate. What should we do? Buy a square foot each month with our two hundred dollars?"

Obviously, Tom was kidding, but I thought he had asked a fairly good question. Is there such a thing as a two-hundred-dollar parcel of land?

"Real estate is a very real possibility," Roy acknowl-edged. "Not by buying a square foot a month, mind you. We'll get into that later, too. First, let's look at what I think is the best alternative for investing the ten percent, at least for most people: equity-oriented mutual funds."