No matter where you turn, it seems like there is always someone there wanting to express an opinion on a great investment, and in some cases, some get quite pushy as often they derive personal benefit from getting others involved in what they recommend.
Often, the advice you receive is bad advice … and can cost you dearly.
It’s therefore very important that at all times you deal with the right person.
When it comes to investment advice, there’s generally only ONE type of person you should take advice from before making any decision – a Licensed Securities Dealer.
These people are qualified – they’ve had to pass strict qualification examinations in order to get their licenses, and therefore understand the nuances of the industry.
They are also actively involved with trading / traders daily, have access to a wide variety of analyst reports, and quite often have direct lines of contact within some of the securities they recommend and therefore are aware of developments which ordinary investors are generally not aware of.
However, this does not mean that their advice is always correct or impartial. As you develop a relationship, you quickly learn whether what they recommend is impartial or not.
In some cases, advisers (Brokers, Fund manager, etc) are appointed to drive an IPO, capital raising or manage a particular fund. When that is the case, their advice is not impartial … but that does not necessarily mean it is bad advice. You need to do you own analysis to determine whether the fund / capital raising they are actively managing and recommending meets your personal investment needs and criteria.
Reputable newsletters – example: Oil and Energy Investment Report which has over 25,000 active subscribers – are Licensed Securities Dealers. They are carefully scrutinized by the authorities and therefore must always ensure the advice they provide is well researched.
Active Traders Can Also Provide Good Direction …
Most active traders do not hold a licensed security dealers license. However, through their day-to-day activities, they have acquired considerable hands-on experience … and in some cases have more knowledge and skill than many who work in large institutions who are paid to provide advice. By all means listen to what they say, even establish a rapport with them so you can exchange knowledge.
You can find people such as this through services such as the Top Stocks forum – http://topstocks.com.au – where participants are invited to BID on the success of calls made by various private investors. It’s quite uncanny how successful some of these private investors are with their calls. [The bidding facility in the Top Stocks service ensures that only genuine investors are participating, hence its value.]
The key is to always undertake your own analysis so when you speak to any of these people or receive a recommendation from them, you are able to confirm what they say to the point which satisfies your own trading plan requirements.
There are some people who you NOT want to listen to at all …
- The spammers who daily bombard your Inbox with emails talking up a stock, saying “this is going to move and now is the time to get in”.
These people are paid to do this – not by the companies involved but by individuals who want to see an upwards move in a stock so they can sell their holdings and walk away. In How to avoid becoming an “online scam” victim (one of the Articles in this Library) …, Caroline Roberts talks about a company which sends out 70 million emails a week in this area alone. People actually respond to these without realizing what they’re doing … and that’s why they continue to go out.
- Anyone who calls you making a recommendation along the same lines as these emails. These people are not qualified at all – and generally they want you to hand over your money, in many instances never investing it on your behalf at all.These operators are referred to as Boiler Rooms — and there’s a reported 200+ of them operating across Europe and Asia which have scammed people to the tune of hundreds and hundreds of $$$millions.
For your safety, the ONLY investment oriented email or telephone exchange you should entertain is one which comes from your Licensed Securities Dealer, a service (e.g. investment newsletter) you subscribe to or locate through a reputable source on the Internet, or an associate whose expertise you value.
Just remember that NO analyst / adviser gets it right everytime. However, many do achieve success rates much higher than the average investor – sometimes by as much as 30% – and therefore their advice warrants further research to determine whether it’s something you should pursue.
These principles are really no different to what you experience in any industry – e.g. if you need legal advice, you consult a Lawyer, not a salesman!
Don’t get caught out …