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.

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