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Beware of Traps while opening Low-cost Brokerage A/c

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Beware of Traps while opening Low-cost Brokerage A/c

When I was passing through the maze of racks filled with jams, biscuits, noodles, I happen to see the nicely piled heap of one-liter tetra pack orange juice, about 100 of them. There was a boldly written marketing message displayed on a placard that read – Buy one Get Two Free. Wow! There were many shoppers around me who were scampering towards the pile of tetra-packs and were loading their already loaded trolleys; they were in such a hurry to take every pack that was on the rack. 

Having spent most of my career in marketing I felt that there was something beyond what I saw as the offer. I managed to pick one of the packets, turned it around, and while scanning what was written on the rear side of the packet I saw that the expiry date was the next day. No wonder the offer was juicier than the juice itself!

To my surprise, none of the people who were dumping the packets into their trolleys bothered to check the expiry date, because their mind was focused on the offer than the expiry date. That’s how marketing is done, you see!

This example is something that’s relevant for those traders or die hard speculators in the stock market that they fail to see the hidden agenda behind offers that scream of offering the lowest brokerage or no brokerage at all. This could be a trap, literally.

Let me tell you another real incident that I experienced in Macau, Hong Kong while on a holiday; Macau is a paradise for gamblers, a glittering city bustling with 24 hours of activity particularly for those who are addicted to gambling and for those who are aspiring to get addicted! In the hotel that I stayed all the guests were offered a complimentary HK$50 coupon that they can redeem at that casino that is inside the hotel premises itself (I am not sure if the hotel is built because of the casino or the casino is built because of the hotel). 

Guests who are already fantasizing about gambling are infused with a shot of steroids with this complimentary coupon. As soon as the check-in formalities are completed the next thing the guest would do is to dart towards the casino escalators that take them straight into the gambling tables. Now the drama starts. Without any prizes for guessing, the free dollars given are lost within the next few minutes which hurts the ego of the person and his legs are invariably dragged to the counter that sells the tokens for exchange of cash. This is how the magic of “free” works in every damn business.

When a stockbroker offers low brokerage, it can be a trap that invariably induces the trader to go for the next level of volume; the gullible trader thinks that he is paying just Rs.10 or Rs.20 per trade and increases the volume and if the trading call taken does not work, the loss is on the trader and not on the broker. It’s all about making someone getting addicted and such offers have by and largely made people fall for it just like a teenager falls for a wink by a girl. Be careful and also mindful before you are made a trading addict by smart brokers; read the fine lines and read between the lines. In the end, whether you win or lose, the broker is the ultimate winner because he holds all the aces!!

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