Stock Investing Guide

Betting on information from people who supposedly have the inside story on a company is extremely dangerous!

Everyone has an opinion and chances are they do not have all the facts. In my experience, trading on tips from these "reliable" sources have always given me the same results:

I lose money!

There is also "Your Brother-In-Law" theory, not highly recommended by anyone ... but followed all too often by many investors!

Your brother-in-law, or "some guy at work," tells you about a stock that is "really going to make you a lot of money." You know nothing about the stock but you rush out and buy a hundred shares nevertheless.

I think the right word for this group is "losers."

Would you buy a stock because an "expert" on TV or a paper says it is a great investment?

Chances are, they or their company own too much of this stock and need to get rid of it.

It is called "Pump and Dump."

Pump up how great the stock is, then dump it when unwitting investors buy it because they think it is a great investment and it is really not.

I am not saying that every "great" stock that is mentioned on TV or in the papers is actually a dud; sometimes they really are high flyers, but I would not put money on them just because some "expert" recommended them!

Would you invest in a stock because of a friend's tip?

It depends ...

But before you decide, check out what he "really" knows about it, and do a thorough research of your own!

Would you place your trust and invest your hard earned money on rumors and street talk?

No!

While we do actually say "buy the rumor" and "sell the fact," on the other hand, how many times didn't the rumor just remained a worthless rumor?

Always try to get unbiased opinion. Ask yourself about the motive behind the "tip." This might save you from a lot of trouble. Besides, you don't need the "tip!"

All it takes to "beat the market" is commonsense thinking, plain good old time dealing and ...
Patience!

Stock analyst' recommendations and reports can influence the price of a company's stock - especially when the recommendations are widely disseminated through public appearances.

The mere mention of a company by a "popular stock analyst" can temporarily cause its stock to rise or fall - even when nothing about the company"s prospects or fundamentals recently has changed!

While analysts provide an important source of information in today's markets, investors should try to understand the potential conflicts of interest analysts might face.

For example, some analysts work for firms that underwrite or own the securities of the companies the analysts cover. Analysts themselves sometimes own stocks in the companies they cover!

The fact that a stock analyst - or the analyst's firm - may own stocks they analyze does not mean that their recommendations are flawed or unwise.

But it's a fact you should know and consider in assessing whether the recommendation is wise for you.

As a general matter, investors should not rely solely on an analyst's recommendation when deciding whether to buy, hold, or sell a stock.

We strongly suggest that a little more digging on your part, beyond what brokerage companies are recommending, will always be to your benefit!

It's up to you to educate yourself to make sure that any investments you choose match your goals and tolerance for risk.

Remember that stock analysts generally do not function as your financial adviser when they make recommendations - they're not providing individually tailored investment advice, and they're not taking your personal circumstances into consideration!

Above all, always remember that even the soundest recommendation from the most trust-worthy analyst may not be a good choice for you!

That's one major reason why you must never rely solely on an analyst's recommendation when buying or selling a stock.

Before you act, ask yourself whether the decision fits with your goals, your time horizon, and your tolerance for risk.

Know what you're buying, or selling and why!

The rules are aimed at bolstering shareholder confidence after financial disasters that called into question the accuracy of company audits and stock analysts reports.

Amongst others, the disasters include the collapse of the dot-com bubbles and the scandals surrounding bankrupt energy traders.

Some analysts misled investors by issuing bullish research reports on poorly performing companies to generate or keep lucrative investment-banking business from those firms.

Many interested groups say that the new rules are better than nothing. But they also say that those rules are years overdue and surely fall short of what is really needed.

These rules take an important first step but do not go nearly far enough to limit the ties between analysts and their firms investment-banking departments.

They also may not be sufficient to resolve some deeply rooted conflicts of interest in the field.