5 Reasons I Never Take Market Tips

Let’s face it—when it comes to investing, everybody has something to say. But whatever you do, don’t fall prey to bad investing advice! There are lots of reasons to never take market tips from others, but I’ve found the following five to be imperative to my success as a trader:

5. Different goals
Whoever is giving you the tip may have a long term outlook on the market and may be willing to hold the investment for 20 years until they retire. Your objective may be to make a daily income. You shouldn’t take their word for your investment. Rise and fall on your own knowledge of the markets.

4. Uncertainties
There are so many uncertainties that it’s amazing that people ever accept tips from others. When someone gives you market tips, you should ask yourself whether or not you know their knowledge level. They may have a degree hanging on their wall, but did they pay attention in class? Did they pass their tests? Would you trust this person to have done proper due diligence on their recommendation? There are so many unknowns. At the very least, if you do your own research, you’ll have no one to blame but yourself.

3. Different investing methods
A mutual fund invests differently than a hedge fund. A commodity pool invests differently than a retirement account. If you are taking advice from someone, make sure that their objective with trading are very close to the same as what you would do. Most of the time when you dig into it you will find that they are not the same.

2. They don’t care about your money
Believe it or not, the person who cares most about your money is you. You worked hard for the money that you have so before you take a risk you should evaluate the potential outcomes. How many people include a budget when they plan a family vacation? How many of those same people don’t know how much money they are looking to make when they place a trade?

1. Ulterior motives
Just like we saw Al “Mr. Green” Gore recently sell out to the biggest oil company, you don’t know if the person giving you the “tip” has something else that he is trying to do. Remember to always, always, always do your own research!

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2 Responses to 5 Reasons I Never Take Market Tips

  1. Eckhard Mueller February 2, 2013 at 11:09 am #

    Thanks for the insight, Nate.

    • Nathan Allred February 4, 2013 at 3:24 pm #

      No problem. Hope this is helpful!