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What To Do If Your Broker Just Lost You a Ton of Money

Most of us are not financial experts. That’s why we trust our investments to brokers who are supposed to understand the markets and our personal needs. They are supposed to protect us against serious losses by plotting relatively safe and profitable investments that don’t expose us to the major risks that our naive investment efforts might otherwise do.

They are supposed to do that, but they don’t always. There is far too much evidence that many brokers don’t take their responsibility seriously enough. They pursue very questionable investment strategies that often involve a very high risk of major losses. The reason for this is that high risk can lead to high gain.

That is a reasonable strategy for some investors, but your broker is supposed to discuss that option with you and go according to your preferences. If you didn’t express a desire to play fast and easy with your money with risky investments, then your broker shouldn’t do it. But, again, many brokers do it anyway. So, where does that leave you?

Let’s review one recent case so we can see what went wrong and what you can do if you’re caught in the same situation. Earlier this year, many investors lost money investing in the LJM Capital Preservation and Growth Fund. What happened still isn’t completely clear. It appears that LJM Capital Preservation and Growth Fund was not living up to its apparent mission to focus on capital preservation and instead was making very risky investments without taking the steps required to preserve capital. That behavior led to devastating losses, including 80% of the stock value, or perhaps as much as $600 million in value.

What was the result? In the immediate sense, it left investors significantly poorer. And since many brokers had invested in LJM without warning their clients of the risks involved, those losses were felt by a lot of innocent investors who didn’t sign up for that kind of risk.

That lack of awareness, though, may end up saving those investors and costing those brokers and their brokerage firms quite a bit. If a broker doesn’t warn their clients of such risks, they can be held accountable for the losses. And since a brokerage firm is responsible for the broker’s activities, those firms may be required to pay for this behavior.

That should answer your questions about what you should do when you lose out in a situation similar to LJM. Sometimes, losses just happen, even with stable and safe investments. Sometimes, you choose to take a risk, and it doesn’t work out. In those situations, you just have to accept that the investments don’t work as planned. However, if you’ve lost money because your broker was taking risks they didn’t tell you about, then you have every right to demand that money back.

How do you demand it? You’ll have to speak to a lawyer to pursue a claim against your broker.

Keep a Positive Outlook!


Stay happy, fellow minds!

If you’re having trouble with this, here are some thoughts that I use to stay happy a remarkable 98.23% of the time!

If you are not thinking things that are happy, stop thinking those things and think of another thing that is a thing that makes you happy instead. Some of my go-tos are:

  1. Kittens
  2. Puppies
  3. Other kinds of baby animals
  4. Ice Cream
  5. Pizza

With practice, you can turn your negative thoughts into positive, happy ones. I believe in you!

Dealing with Foreclosure

The economic crisis has hit a lot of people where it hurts most: the home. Plunging real estate values, rising interest rates, and sudden unemployment have all come together to make hitherto stable finances teeter on the edge of disaster. In increasing numbers, homeowners are facing foreclosure all over the US.

There are three ways that you can deal with the threat of foreclosure. You can ignore it and hope it goes away. You can panic and try to raise money to settle your arrears. You can keep calm and explore some debt management strategies.

Ignoring it will obviously not work as inevitably the sheriff man cometh. Getting together all that you can beg and borrow from family friends (who are in all probability also in the same situation) will probably work as a stopgap but unless there is a substantial increase in the cash flow, essentially throwing good money after bad. Debt management, on the other hand, is a more proactive way to go. Essentially, managing debt is simply weighing what you have against what you have to pay, and resolving to make them at least equal. If things are not yet so far advanced as to be irreclaimable, you could get help from a credit counselor to help you cut on costs and increase income so as to balance out the equation. In some instances you could look into consolidating all your debts to get a better rate, or negotiating with your lenders to restructure the terms of your debt for longer repayment period and/or lower monthly payments.

But if foreclosure is imminent, you may have to file for bankruptcy. If you are employed with the requisite income, you may do well with a Chapter 13 filing, which is essentially a court-supervised debt restructuring scheme. If you have no income, you may do better with Chapter 7 bankruptcy, which is an asset liquidation program. However, there are many things that come into play when filing for bankruptcy. Before taking the plunge, consult with a bankruptcy lawyer to better understand what you may be getting into and to get an accurate assessment of what would be your best legal option.