A friend of mine sent me a link to some online stock tips. Looking to invest in stocks for the first time, she did some googling. And she was excited to show me what she found — suggestions for stocks in a growing industry she was especially interested in.
The stock tip sites that she found did provide a good analysis of the industry growth she could expect. They also explained why a few stocks in particular had the best chance of doing well as time went on. It all looked very sound and reasonable. And exciting to a newbie investor.
After checking out what she found, I saw that they did a solid job of explaining the concepts involved. And the stocks did seem to have good fundamentals that should help them do well. At least, on paper.
So what’s the problem with online stock tips?
This is not to say you can’t make money from tips you find online. You just have to realize a few things about the tips — especially by the time you see them. Even if you are one of the folks who get their “hot tips” newsletters!
Just good to keep in mind that industry growth has nothing to do with whether any one stock will grow too — or at least when the growth happens. Also, the price may already have reached a level beyond expectations early. And it may head down, even if the industry / company is looking hopeful.
In addition, there simply may be a long wait for further growth (i.e. decent profit on your investment). Or just that the company, as good as it sounds now, doesn’t perform well. It happens.
So by the time you see those online stock tips …
If you can find it online, others have found it too. And the stocks may already have had healthy upward bumps for that reason. Stock prices going up now is about anticipating the future earnings. It guarantees nothing.
Stock markets are about what people think the company will be worth down the road. So, often, big expectations are already built into the current price.
It’s a lot about psychology, as well as sound fundamentals. PLUS … some online sources hype stocks JUST to reap their own profits, as others rush to buy into their online stock tips wisdom.
Not to say you shouldn’t pay attention to online research
There’s a lot of good online research and general guidance worth reading. Just don’t think any one source is going to keep the huge profits rolling in for you. If there were any one source that good, the professionals would use it and beat you to the biggest price jumps anyway.
Of course, you might pick a doozy or two. Just hoping this article adds some basic understanding to help give you perspective. And enough online stock tips savvy not to be fooled by sites designed solely to pump up stock prices — and then dump them by the time naive investors get into the action.
A few final thoughts
Most importantly, never invest money that you really need in individual stocks. Sure, it’s a gamble that may pay off. But anything can happen to a company at any time. And you could also lose it all.
Enron was considered a quality stock by many wise investors. The industry was golden. But internal fraud brought it down. I am a seasoned investor, and I never forget this — even when I love a stock.
And that’s why, if this is not money you can afford to kiss good-bye, you may be better off in mutual funds and / or ETFs. Or CDs, if you absolutely can’t afford to watch your investments go down.
And, even more wisely, a diversified portfolio that might even include some individual bonds with maturity dates. As with funds, it’s about spreading the risk. Especially if you’re someone who is going to be nervous watching prices go up and down. That’s just part of owning stocks.
OK. I’ve done my due diligence. As long as you know that online stock tips — and individual stocks in general — are a gamble that may pay off big. Some do. But they may completely collapse. Or anything in between. I wish you a wonderful pick(s) if you do decide to go that way. Have fun!
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