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investor clinic

About a year ago, my broker advised me to sell two stocks (a bank and a utility) that have since risen sharply in price. Not only did I miss out on the gains, but the combined commissions for the sales were more than $500. I am devastated thinking about how many thousands of dollars that I lost by going along with his suggestions. Just wondering how one copes with these kinds of losses without falling into a deep depression.

There are two issues here. One is your relationship with your broker. The other is your mental health.

Let's deal with your broker first. When commissions are involved, you must always be alert to potential conflicts of interest. Your broker may have an incentive to trade because it puts money in his pocket and because he is required to generate revenue for his firm. But trading frequently is not in your best interest as an investor because it entails costs in the form of commissions, capital gains taxes and potential lost opportunities.

I believe the best strategy for most individual investors is to buy and hold a diversified portfolio of blue-chip stocks that raise their dividends regularly and to consider selling only if a company's outlook changes fundamentally for the worse, which does not seem to have been the case with the stocks you mentioned. (If you are not comfortable owning individual stocks, consider low-cost mutual funds or exchange-traded funds.) I suggest you inform your broker, politely but firmly, that you intend to do minimal trading from now on. If he comes to you with a recommendation, say these five magic words: "Let me think about it." That will buy you time to decide if the trade is in your interest, or his. Brokers will often provide what seem to be legitimate reasons to sell one stock and buy another but, as you discovered, it pays to treat their pitches with skepticism. I should stress that I do not know what your adviser's motivation was, and I do not want to depict all advisers – many of whom have their clients' best interests at heart – in a negative light. But it is your money and you have the final say in how it is invested. (For examples of stocks that raise their dividends regularly, see my Strategy Lab model dividend portfolio.)

Now, to your question about feeling depressed. I am not a mental health professional, but if the regret and sadness you are feeling are interfering with your life – and the fact that you reached out indicates that this might be the case – then I would urge you to speak with someone whom you trust, such as a family doctor, so you can get the help you need.

Finally, remember that we all have regrets. I've made some lousy investments, sold stocks I should have held and missed out on great opportunities, but I treat these as learning experiences that will make me a better investor in the long run. Nobody learns how to build wealth without making lots of mistakes along the way.

Your unfortunate experience with your broker may turn out to be a blessing if it motivates you to take more control over how your money is managed. If you feel that your relationship with your broker has been permanently damaged and that you need a fresh start – for your financial and mental health – you may wish to investigate other options such as hiring a portfolio manager who does not work on commission but charges a fee (usually around 1 per cent) based on a percentage of your assets. This reduces the potential for conflicts of interest and unnecessary trading. More information is available at the Portfolio Management Association of Canada website. Other alternatives include managing a self-directed portfolio of mutual funds or ETFs, or using an online wealth-management service or "robo-adviser." My colleague Rob Carrick wrote a primer on robo-advisers here.

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