“Stocks tips” are an inevitable occurance when people know you like to invest. They might come to you to show off their knowledge or just want your opinion on one they’ve heard of. The worst kinds of stock tips are when they come from someone who isn’t an investor, but “heard this one is a lock to make money”. In the end, stock tips are almost never a good way to invest. The first reason is that if it’s a very valuable piece of information that the public doesn’t know about yet you are likely receiving insider information and therefore it’s illegal. The second reason is that by the time the “tip” filters down to our level, everyone who can move markets and thinks it’s valuable information is likely already in the know.
I just got a phone call from someone in my extended family who knows I do well with our investments and wanted me to buy a stock “that is trading at 0.47 is about to IPO”. It took about a minute to explain that if it’s already trading, then it has already come to market. I took a quick look to see it’s been trading for more than 10 years and has had a split adjusted high of over $800.00. Yes, the decimal is in the right place. She doesn’t have an investment account and offered to give me $1,000 to invest for her through my account. I said no.
Technorati Tags: investing, stocks, stock tips, trade