Why most brokers hate the word sell
When it comes to making money, most brokers and fund managers earn profits when you have your money invested.
But if you sell an investment, without buying another, the odds are you’ll pull your money out of the markets where your broker can’t earn from it.
Now before I go on, let me get one thing straight… You broker isn’t out to get you. He’s not trying to milk you dry. In fact, the good brokers will often make you far more money than they charge.
So why doesn’t he want you to sell?
The simple truth is he knows that most people can’t resist spending their money once they’ve sold out of an investment.
He understands that more often than not, when you sell without investing in something else, your money is out of his reach to profit and you’ll likely lose out on growth from your investment.
That’s why you’ll hardly ever see a sell signal in analyst presentations and broker reports. Even if your broker thinks a share is a sell, he’ll phone you and tell you to sell those shares and he’ll suggest that you buy something else.
But for traders, a sell doesn’t have to mean you’re pulling your money out of the market. And it doesn’t have to be a word that gives your broker a headache.
Thanks to special instruments, you and your broker can profit when you sell
Thanks to special instruments called derivative products, you can sell shares that you don’t yet own.
These instruments, called CFDs or Single Stock Futures (SSF) are contracts where you agree to sell a share at a certain price in the future. But you use these contracts when you believe the price of the share will fall.
That way you’ve set the price that you will sell the shares at using this instrument contract, then when the share price falls, you can buy the shares on the market. By doing this, you’ll then have the shares to sell at the agreed price in the contract. And the difference between the agreed price in the contract and the lower price you sell the shares for is your profit.
These derivative instruments are incredibly useful tools – Especially when you think a share price or market will decline. In fact it means you can profit from the up and down moves. And just to keep your relationship with your broker in good stead, he’ll also be able to profit when you trade using these instruments.
So call your broker today and ask him about SSF’s CFDs and if they’re right for you. Before you know it you could be cashing in as the markets fall.
Until next time,
Here’s to staying ahead of the game.