Advertising or Education

Which are you getting from your broker?

There’s a big difference between education and advertising.  We should all know this, however when it comes to the world of investing many of us forget.

According to Miriam-Webster, education, or by extension learning, is the activity or process of gaining knowledge or skill by studying, practicing, being taught, or experiencing something.  On the other hand advertising is a form of marketing communication used to encourage, persuade, or manipulate an audience to take or continue to take some action.  This is a big difference.

It’s important to remember that brokerage firms primarily make money one way – getting you to trade.  The more you trade, the more money they make.  It’s a pretty safe bet that the more they “educate” you and the more you think you know, the more you will trade.  Why do you think that many of the brokerages will entice you with account bonuses or free trading just to open an account?  They’re not giving you free stuff just so you put your money in a money market fund.  They want you to trade.  Isn’t this exactly what the casinos do by giving free drinks and a seafood buffet to anyone who places a few bets?  They give you something for free to get you hooked.  The house always wins.

Chances are, if you get your investment education from a brokerage firm, it will be a very expensive lesson indeed.