Taming the Money Sharks: 8 Super-Easy Stock Investment Maxims

Chapter 3

Wise Use of Information Resources

Should You Follow Hot Tips?

Try to distinguish between a stock commentary and true sound investment advice; take time to evaluate future long-term investment opportunities!

A. Listen to a Friend or Relative

Don’t just listen to a stock name with a sensational story and invest right away. Do be critical, because the tips you receive may be good only very temporarily. Recall that in my story in Chapter 1, Joe was a “good friend,” and I listened and responded to his hot tip. As a result, as a young man investing in the stock market for the first time, I lost 25% of my net worth in four weeks.

What we should be aware of is that when we trust a “good friend” or a relative as a person, that trust carries over to a “good stock.” I was just following human nature, thinking

• I could be miserable if I did not buy the stock, as I might have missed a golden investment opportunity. I thought his information was valuable and adequate enough for me to make a decision.
• I felt obligated to my “friend” because I wanted to help his business (assuming this relative or friend is in the investment sales business).
• He might dislike me if I had not taken action because he was convinced of the reliability of his recommendation.

With any stock investment, it is almost like imagining yourself in a maze, with so many things to consider prior to a successful outcome. ...