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House Stock

House stock refers to a security or financial instrument that is heavily promoted or recommended by a brokerage firm to its clients. Often, the firm has a vested interest in the stock, either through ownership or relationships with the issuing company. House stocks may be pushed by brokers as a priority for client portfolios, but they can carry higher risk due to potential conflicts of interest and reduced impartiality in the recommendations.

Example

A brokerage firm aggressively promotes shares of a particular biotech company to its clients, encouraging them to buy the house stock despite it being more speculative and risky than other investments.

Key points

• A security or stock heavily promoted by a brokerage firm.

• The firm often has a vested interest in the stock.

• Can carry higher risks due to potential conflicts of interest.

Quick Answers to Curious Questions

Firms may promote house stocks due to ownership interests, relationships with the issuing company, or the potential for higher commissions from sales.

Investors may face higher risks if the stock is promoted more for the firm's benefit than for its investment quality, leading to biased recommendations.

Investors should be wary of stocks that are heavily promoted by their brokerage firm and should perform independent research to assess the investment's quality.