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Let's assume I've no knowledge or skill in investing and that I've a 19 year old French student. Also, I earn 750€ per month, until I'm 21 when I will earn 950€. These are after-tax numbers.

My banker told me that if I want to invest, I should ask her and that she will help me to choose the best option for me.

Should I trust my bank (& my banker) about it? Not that banks necessarily have bad reputation... but they do.

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Should I trust my bank (& my banker) about it ?

Blindly NO. Most Banks / Advisor's get commission for the sales of financial products. They would be more motivated to sell something that gives them larger commissions that what is best for you. This is similar to a salesman trying to sell you electronic goods or any other item.

Do your homework. See if there are any fee only advisor's. They are more motivated to recommend what you need and get paid for the advise irrespective of whether you buy the the recommendation from any financial institution or don't buy.

  • Don't you need a bit of money before contacting an advisor ? A banker give free tips, he's maybe motivated by commission, but isn't it ok for someone with low budget ? – Valentin Silvestre Jul 31 '17 at 10:42
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    @ValentinSilvestre One way or another, an advisor is going to need to get paid [unless you use something casual and less professional, like this website, or perhaps a non-profit/ charity service]. The question is: how will they get paid? As Dheer suggests, if you don't know anything at all about investing, and you blindly give your money to someone, they may earn a commission by opting that you buy investments which are not right for you, but earn a nice commission for the banker. Note that some jurisdictions may have protections that restrict such double-handed transactions. – Grade 'Eh' Bacon Jul 31 '17 at 13:12
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No. Professional fund managers typically do worse than sticking your money in a cheap index fund. Your banker is (probably) a bag man for funds of that nature being pushed by the bank; your banker will (probably) take a kickback on some expensive fund they pick out for you.

If you want to start investing, identify a cheap online broker and put your money into low-cost index funds with dividends reinvested. They're cheap and they do better on average than funds actively managed by professional managers.

Here's something to read about it; http://www.marketwatch.com/story/why-way-fewer-actively-managed-funds-beat-the-sp-than-we-thought-2017-04-24 . Interesting quote;

Over the last 15 years, 92.2% of large-cap funds lagged a simple S&P 500 index fund. The percentages of mid-cap and small-cap funds lagging their benchmarks were even higher: 95.4% and 93.2%, respectively. In other words, the odds you’ll do better than an index fund are close to 1 out of 20 when picking an actively-managed domestic equity mutual fund.

That quote is US specific, but the principle certainly holds across the rest of the world (and this being the future, I routinely invest in foreign indexes at low cost in exactly the same way I invest in domestic indices).

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I think you need to understand what your banker means by that.

There's a difference between financial planning and investment adviser. What type(s) of accounts to have, how much emergency fund to have, where to store the emergency fund, should you buy a property should you start a retirement fund, how to do things tax efficiently, etc. Versus, you should buy this or that security specifically.

Bankers typically work on commission to sell you products offered by the bank, so it's probably a conflict of interest to take advice from a banker without a healthy amount of skepticism. Ultimately the bank/institution with the best products probably also has sales people, so...

Financial products aren't much different than anything else. If you were going to buy a car you would probably go to more than one dealer and look at more than one model. Hell, in this day and age, if you were going to buy shoes you'd probably shop around. There's no reason to trust one vendor completely.

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