Why it's better to pick stocks based on your own assessment...

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So, it seems that Mathew Easow has been fined just Rs.20lakh for advising people to buy stocks which he himself sold. Big Brother SEBI was watching, or was tipped off.

We all take recommendations when buying shares, yes? Not everyone has perfect knowledge of each and every company, which is where taking a broad range of opinions is a good idea. Analyst reports, and suggestions based on research and reason are the best, but some of these reports run into 10-15 pages for a single company and again you go back to your broker.

Most brokers will also recommend stocks (which is why people stick to a brokerage firm, rather than trading online themselves), but often brokers too can be under pressure to meet targets and could give incorrect advise. My advice?

- Don't day trade unless you're at the terminal throughout the day or your brother is a broker managing your money.
- If you can't track specific stocks, go for mutual funds
- Corroborate all advise with news. A Google/Google News search throws up enough information.
- Subscribe to analyst reports if you're getting stock specific
- Play the percentages game on tip-offs...don't look at making money in absolute terms. Rather put in 10k to make 10%, than Rs.50k to make Rs.5000. Same percentage, but the latter is riskier since you can also lose more.

Anyone (if whitelight still reads this blog) tried Moneycontrol's Power Your Trade or Power India Bulls?
1 Comments:
Anonymous RP said...

Gotta agree with the investment tips. One thing I want to add to your tips is that there is a lot more knowledge about industry trends / competitive threats with the people working in a specific sector. For eg., as a s/w guy, I always knew Macromedia (didn't work for it) would get acquired. Was just a question of when. IMHO (based on a unitary personal anecdotal evidence :), it may pay off to also have the right insider perspectives.

October 04, 2006 5:28 AM  

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