Saturday, May 5, 2012

Stock Tips

Ah, the ever entrancing stock tip.  So, what do you do when someone gives you a stock tip?  First, run as far away as you can or, in my experience, question why they feel this stock is going to "Pop".  I'm sure your reaction to what I have just written is, "Well, don't you give us stock tips periodically?".  To the amateur, that would be the assumption, but you have to understand what it means to be given a stock tip as opposed to investing advice.

A stock tip is given when someone tells you, "I heard on TV..." or "A friend of mine said...".  Those are indicators of stock tips.  Since I am not on TV and I am not your friend, my suggestions are supported with information to back up the suggestion. 

What are you to do with my suggestions?  You must do your homework to see if what I am spewing out is correct.  Most people are not willing to put in the research required to be an informed investor.  Is putting in the time and research guaranteed to bring in optimal results?  Prior to 1974, that would be the case, because 1974 is the year that IRA's were approved and mutual funds took off.  The market went from a pool of sophisticated investors to everyone and their mother jumping and throwing the market off kilter.  The issue with this is that stocks are inadvertently manipulated by investors who have no idea what they are doing.  Good companies get beat up and bad companies get held up by the uninformed investor. 

The bottom line of all of this is to be your own man and do your own homework.  Do not rely on stock tips and stock trends that have no back up for their reasoning.  The market overall is illogical and therefore should be ignored.  If you invest in individual stocks, there is no reason to pay attention to the DOW, S&P or any other index.  Companies stand on their own and if they are a good company, they will prevail in the long run.

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