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- Why do I need professional guidance when exploring exotic investments such as virtual currency, derivatives, and credit swaps?
- Do brokers have any obligation to monitor the performance of investments they sell?
- Do brokers know all about the investments they tell me to buy?
- What should I do if I wish to invest in an area in which my broker is unfamiliar?
Why do I need professional guidance when exploring exotic investments such as virtual currency, derivatives, and credit swaps?
There are many reasons why you need to seek professional guidance before you enter exotic investments. Many exotic investments are not transparent, meaning it is quite difficult for you to assess many key attributes of the investment, including how its underlying value is derived, what the demand may be, or even what the returns and risks may be. Exotic investments may also be quite complex, representing business models that require a great deal of expertise to understand what they do or how they create value. You should either avoid these investments entirely or seek the guidance of an expert in this investment area before deciding to invest.
Do brokers have any obligation to monitor the performance of investments they sell?
Brokers are under no obligation to monitor the performance of investments that they sell to you; as long as the investment was good at the time you purchased it, they are under no legal obligation to follow that investment or plot its course for you (although many do advise the best time to buy or sell). You must determine when to buy and sell, even if you use a broker or adviser.
Do brokers know all about the investments they tell me to buy?
Some brokers are well informed about the investments they sell, and are well trained in investment analysis. Some brokers sell clients exotic investments, investments inappropriate for the client's age, or investments that are far too risky without knowing the difference. To avoid this, you must do research to understand what you are investing in, and its potential risks.
What should I do if I wish to invest in an area in which my broker is unfamiliar?
Ask him to refer you to another broker who is an expert in this area, and who has the necessary credentials, education, and training to help you invest.