Hurt by Frequent Trading

Years ago, a co-worker came into my office with a marvelous story of how he was making lots of money with an investment adviser who was buying and selling stocks for him. Not long after, I sent this “adviser” my money, and he assured me he was investing it to make me rich.

I later discovered the adviser was just trading frequently and racking up some very high brokerage fees. I didn’t even know what investing on margin was, but he had me doing it, and soon I was getting notices that my stocks were being sold to cover losses as various stocks were going down.

It was a very expensive lesson. I learned there are questionable advisers who don’t have your best interest in mind. I also learned that the No. 1 person with your best interest at heart is you, and not to invest in anything you don’t understand. — F., online

The Fool Responds: Some financial professionals do have conflicts of interest, such as if they’re compensated for selling you on certain investments. Others may simply not be skilled investors. Many investors without much confidence in their holdings will jump in and out of them every time they run across new and exciting investments. Such frequent trading will rack up commission costs — and can boost your tax bill, too. Some advisers are great, however, though being in charge of your own money is smart, too.