Expert: Steve Hach - 12/11/2009

Question
hello, i want to be a stockbroker oneday and I am just wondering ...if an investor calls and wants to know the possible returns they can gain on their portfolio or indvidual stock...and also the losses they could lose...how would you figure this out? what would you tell them??  Thanks!

Answer
misskitty,

The best answer would be "I don't know."

However, there are many ways to value a company and its stock price.  This is something you would learn in college with a finance major.

Keep in mind that a broker is basically a sales person, they make money whether a stock goes up or down so they don't really care what happens--and if they EVER say they know a stock is 100% going up or down they are lying and you better keep your hand on your wallet.

There are also traders that buy and sell stocks/bonds/commodities for banks, hedge funds, and financial institutions.

And, there are analysts that work at major banks and financial institutions who do make it their job to estimate what companies and stocks are worth today and in the future.  This job requires lots of research and math and is typically a highly paid position.  

If you want to sell stocks to people for a percentage, be a broker.  If you want to research the balance sheets of companies, industries, and various sectors of the economy, become an analyst.

Also, many people with math and computer backgrounds have jobs in finance.  That is another avenue for entry into the field if you do not want to be stuck with a business degree.

Keep in mind too that the days of easy money in finance may be gone forever, the recent market shake up has led to significant changes for entry-level workers.  Sure, you may see some stunning pay levels for those already in the system, but entry-level workers no longer have the easy path to riches they once did...

You want to check out a book that everyone reads and is considered "the bible" when it comes to figuring out stock prices?  Go to the library and check out Graham and Dodd's "Security Analysis."

Hope this helps.

Best,

Steve