Be Careful Where You Get Your Investment Advice

When you are investing, you should pay strong attention to where you get your information. Some information, like stock quotes are a commodity. You can get them just about anywhere – Yahoo Finance, Google Finance, CNN Money, etc. Just type in your stock symbol and you are good to go.

Most of these sites provide free historical information that you can view based on time periods such as current day, last week, last month, last 6 months, year, 5 years, etc. This information can be great for comparing how stocks have performed in the past. But one thing they don’t tell you is how the stocks will perform in the future.

Here are some investment tips you should beware:

An “inside tip” isn’t inside information if it is published

First off, insider trading is illegal. There are no ifs, ands, or buts about it. But some people think that they have inside information just because they read about a stock in an article on a popular website or in a reputable trade publication. In fact, that is just the opposite. Millions of people have access to the same information; you don’t have any investing advantage.

Beware of agendas and scams

Who is giving you this information? Is it your broker, who gets a commission on every trade? Did you get this info from an “insider e-mail,” a voice or fax that was sent to the wrong number, or a mailer touting the latest oil discovery in Canada? In the first case, your stock broker may just be looking to make a few extra bucks by churning your account. In the second instance, you may be falling victim to a penny stock pump and dump scam.

Beware of the office day trader

Two weeks ago my buddy called me at home. We work together and sometimes meet up on the weekends to hang out. But we don’t talk on the phone much. So why did he call me? To give me a hot stock tip. He has mentioned this stock to me in several conversations over the last few months, and this time he mentioned it was set to make some very positive gains in the coming weeks due to a big announcement about some new technology (see the tip above). Long story short, with the current economic crisis, the stock he touted so highly dropped 50% less than a week after he bought the stock.

There are no guarantees

Investing has inherent risks. The stock market as a whole will move up or down on any given day, and has the potential to make or break investors. Don’t act unless you are aware of the risks. Start with a little education – stock market for beginners – then work your way up to more advanced topics.

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Date published: October 7, 2008. Last updated: July 18, 2011.

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Ryan Guina is the founder and editor of this site. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is currently serving in the IL Air National Guard. He also writes about money management, small business, and career topics at Cash Money Life. You can also see his profile on Google.

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