Take Stock Advice With a Grain Of Salt

If you were to go on Twitter right this second and type in something like “investing” or “retirement”, you would be greeted with thousands of articles and tweets. Half of those tweets might tell you to go right now and buy shares of Apple (AAPL), while the other half tell you to dump every share you own in the tech giant. Who would you listen to? One of the two has to be right, don’t they?

 

Stop Listening to Investing Advice On The Internet.

 

One of the two investing “gurus” that you follow on Twitter would be right. The problem is, it’s impossible to know which one it would be. Trying to guess which way an individual stock will go is the same as guessing what numbers will be drawn on tonight’s lottery. You can read a dozen fortune cookies and chances are you still won’t get it right.

 

When I first started buying stocks in an individual investing account, I read all of the advice I could from places like Motley Fool, The Street and (gulp) Seeking Alpha. For a while I tried to follow all of the investing advice I could find online because I figured these guys knew more about the stock market than I did. It turned out to be a big mistake and I lost a fair amount of money trying to follow the advice of all the stock market “experts” online.

 

The Problem With What We Read Online.

 

The internet has changed the way we digest information. In today’s world, anyone with a computer or smartphone can hop online, start a twitter account or blog and offer investing “advice” or stock picks. How do we know where to find real investing advice with so many people giving an opinion online?

 

One of the resources I used to research stocks at first was Seeking Alpha. I read dozens of articles and followed the advice of several contributors only to realize that they didn’t do much better than I did. Several times I bought a stock based on the opinions of those writers only to get screwed and realize it was actually a pump and dump.

 

One example of this when I bought shares of Galena Biopharma (GALE) based on the information in a Seeking Alpha post. The author touted GALE as a ground breaking pharmaceutical company with a potential blockbuster drug called NeuVax. I bought shares thinking this was my golden ticket.

 

I was an idiot. 

 

It turned out I was just one of thousands of bag holders left with a small fraction of our investment when it came out that the articles were promotions paid for by GALE so the CEO could sell shares at an inflated price. Right then and there I realized I couldn’t trust investing advice from anyone, especially on the internet.

 

How to Avoid Manipulation By Stock Gurus.

 

Man chasing high returns on his investment.

Stop chasing high returns and invest in mutual funds and other safe investments.

 

After several missteps in the beginning of my investing journey, I came to the realization that no one’s advice can be taken without a grain of salt. In most cases, if someone is touting a stock, it’s for their benefit not yours. I came to see that it’s the nature of the stock trading business and that’s when I vowed to no longer trade or buy individual stocks.

 

The only way to keep my money safe and stop being manipulated was to seek out mutual and index funds that weren’t promoted by shady gurus on the internet. My broker (Trade King) offers tons of mutual and index funds that I can buy without the risk of being a bag holder when the stock promotions inevitably come to an end.

 

You see, 99% of the investing world is full of crap. Stock alert services are all over the internet and they’re just waiting for us to seek them out for advice on which stocks can make us money. The promoters tout a stock as the next big thing, but only after they buy thousands of shares at miniscule prices to sell to us. The entire time these stock pumpers have the intention of selling us their shares at inflated prices and cashing in on the profit while we potentially lose everything.

 

It’s a sick, greed driven world we live in. If we allow them to, stock advisors will sell us advice that goes against our best interest. The only way I know how to avoid becoming a victim of this greed is to stick with mutual and index funds that diversify throughout several different stocks.

 

If You’re Still Trading, Do So At Your Own Risk.

 

This isn’t investing advice. I don’t claim to be an investing expert or stock guru. I’m simply offering you my experience so you can skip the learning curve that I went through.

 

I started out with an individual investing account so I could trade stocks because I thought that was where the money could be made. As I said before, after a handful of losses, I realized how risky trading was and how unreliable the advice on the internet could be. So, instead of continuing to give my money away to pump and dump artists, I changed up my strategy and started using a buy and hold approach with mutual funds, index funds and dividend stocks.

 

I just wasn’t willing to give away my hard earned money any longer and I don’t want you to either. There’s a good reason 90% of traders lose money. It’s because the 10% have more money than you, they have better trading software and they have resources that cost thousands of dollars helping them find the right stocks to buy.

 

Unless we can compete with those professional traders, there’s a good chance we will lose money trying to beat them. In my opinion, it’s much better to make an average but unspectacular 8% return than lose much more than that trying to keep up with the next big stock pick.

 

The only investing strategy I would recommend is a buy and hold strategy that centers around the best mutual funds and dividend stocks. Trying to buy individual stocks is risky and with all the contradicting advice out there, it’s impossible to know which is accurate.

 

Do what I did. Open an IRA with a discount broker like Trade King, start to buy a handful of good mutual funds and dividend stocks and just let compound interest do it’s own thing. I know it’s hard to ignore the illusion of big money being made in the stock market, but we have to try. The odds of making money trading against professionals are minimal at best.

 

 

brokeGIRLrich

 


 

 

4 Comments

  1. Great advice! There is just far too much advice on stocks for much of it to be any good. I think it’s ok to invest in individual stocks if a person does enough research on the company themselves to be sure it’s a good investment in their own minds, even without the “experts” thumbs up.

    • I agree completely. I’m not opposed to owning individual stocks, in fact I own shares in several companies.

      What I’m not in favor of is trying to trade stocks or time individual stocks. There’s far too much crap going on out there. I’m all for a more conservative buy and hold approach.

      Thanks for reading and responding! Hope to hear from you soon.

  2. Great blog post John. Thank you for sharing this information. I agree with you 100% that timing the stock market or individual stocks (which is even riskier) is a lost cause. Mutual funds are a safer route indeed.
    For my clients who really want to invest in stocks, I recommend companies who are properly managing their debt along with their profits.
    I also tell them to make sure that the money they’re investing is separate from their emergency fund. I’ve seen it too many times where clients foolishly invested part of their emergency fund only to find themselves selling at the wrong time due to an unforseen financial emergency.
    This post of yours will save your readers thousands of dollars in their investments. Thank you again for sharing.

    • I appreciate your contribution to this conversation Clint. My goal is to help people accumulate wealth while avoiding the mistakes that I’ve made in my efforts.

      I went through the stock trading phase and if anything it lost me a handful of money and even more confidence. It’s simply not worth it and can be dangerous to our financial situation.

      I’m glad you stopped by and weighed in on this. Hope to hear from you soon Clint.

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