Best Stock Advice
So, the question still remains unanswered - whom should we trust? Whose word should we take when we are at that critical point of making a 'buy' or 'sell' decision?
Most people are happy to dish out advice, whether useful or not. While investors usually know to take such wisdom with a pinch of salt, sometimes it’s too tempting to resist taking advice from people who swear it has paid off for them. This is especially common in the case of financial advice from friends and relatives. Whether it’s a friend recommending a winning stock or an older relative telling you that real estate and gold never fail.
Several studies in the field of behavioral finance show that peers can influence our stock market participation and asset-buying decisions. Money matters are very personal; hence people tend to rely on close friends or relatives for advice regarding saving and investments.
What matters to investors is whether they can get good returns on their investments. If this is confirmed by friends, there’s no stopping them.
However, free advice, in general, can do more harm than good. Not only are your friends unaware of your exact financial situation, but they are also unqualified to offer you advice. Often, the advice given by friends or relatives is based on their personal experience. So, it may be very subjective and unsuitable for an investor’s current situation. One size does not fit all. Just as a diet that suits one person may not suit another, an investment plan that works for someone else may not work for me.
There are many investors who just blindly follow the advice or the share market tip given by their friends. It's not that their friends mean to harm them in any way, but their friend likely received that tip from one of his friends who got it from his friend's friend. So, it is possible that this distant friend may not care about the said investors' best interest. The point here is that this is how the herd mentality in the market gets formed, and more often than not it leads to failure.
To identify good stocks, one needs to assess all the fundamentals, trends, and patterns of the stock before ascertaining its best buying level and its growth potential. A free tip will never do that, at best, it can give an investor some intraday gains. But most of the investors end up losing a lot of money going through this channel.
The stock market is a big part of our economy. Naturally, it gets a lot of airtime and newsprint. Business journalism is so big that it gets dedicated channels and newspapers which only carry business and financial news stories. The common mistake people make is to expect advice for their investment from these mediums. Though there are various features on these channels which make you believe that they are extending advisory aid to you, however, it's so generic that it's hardly of any use. It is just a share price list and nothing else.
If we check the nature of reporting of the financial media in the thick and thin of the market, their true face will be revealed. When the market had collapsed in 2008, the financial news channels across the globe had left no stone unturned in creating panic and fear amongst the investors. On the other hand, when the market rallies, the same media creates an atmosphere of great euphoria with absolute disregard to possible corrections or roadblocks ahead. Financial media, like general media, just reports the news.
It is not that financial news channels don't add any value to one’s investment wisdom. They do carry a lot of informative features which are very useful for investors. For example, many financial news channels and newspapers carry programs and articles on tax saving and understanding the complex operational issues related to investment which can be very useful for the investors. However, the problem starts when we start to expect personalised investment advice from these mediums. These are TRP driven mediums, providing personalised service is not their objective.
Let's clear this confusion once and for all - stockbrokers are not stock analysts; their single-minded objective is to induce the investor to do more and more trades. The point to note here is that stockbrokers are well versed in stocks and can identify a good stock from bad stock. Stock tips coming straight from a broker has more chances of hitting the target, but it still doesn't suffice the long-term objective. Reason being, stockbrokers are salesmen at best, and they represent a brokerage firm which gains every time we make a trade. Hence, more we trade more brokerage the brokers and the firms earn. When they have such vested interests, do you think, by any chance, brokers will provide a stock call for value investing? Not really.
If an investor is looking at the stock market as a platform for investment then the first thing they should do is stop listening to their stockbrokers. There is a sea difference between a stock analyst and a stockbroker. The former studies and analyses stocks and scrutinises it on all the fundamentals while the latter just recommends it without any in-depth research. Though they try to impress upon investors that they know everything about the market but a broker is not an ideal person to go to for investment advice.
To get customers, brokers have to sell the belief that an investor can trust them with their money. That belief is its primary product. If investors have faith, they will buy the financial products they recommend. The same is true of financial advisers and financial consultants if those are the titles that one’s broker uses, as well as financial planners and insurance agents who sell products on commission.
As a customer, however, one should never trust their broker. One can like their broker, think him smart, or find him helpful. They can ask their broker for stock research or ideas. But trust should have nothing to do with that relationship. If it does, the investor will be on the losing side.
All too often, investors get trapped by their brokers, emotionally. Because they’ve trusted and admired them, because they are friends, the investors are reluctant to think that something might be wrong. The investors don't want to hurt their feelings by challenging their performance or making complaints. It becomes hard to move the investor's account, especially if they still see the broker in their social group.
Rule One for investors, then, is to keep their distance from their brokers. Don't play golf with them or invite them to parties. This should be purely a business relationship. If you're not satisfied, move on. Don't open an account with a relative or the spouse of your best friend, who would be especially hard to shed.
Rule Two is to remember how little "trust" really means when the chips are down. Your broker wants you to treat his or her ideas as gospel. If it turns out that you were sold a pig in a poke, however, the broker will argue that the decision to buy was entirely up to you. If you trusted him, that's your problem.
Rule three is to understand the real nature of brokers' jobs. They're expected to bring in tens of thousands of revenue dollars each day. The firm "chains you to your desk in the morning and they're not going to release you until a certain quota has been reached," one broker said in a focus group for the National Endowment for Financial Education in Denver. When a broker asks a colleague, "How are you doing?" he's not asking, "have your recommendations made money for your clients?" All he wants to know is, "How much have you sold and what commissions or other revenues have you racked up?"
Brokers take the heat when they push investors into expensive or mediocre products, but remember that management lights the fire. Even a well-meaning broker can be driven to rogue practices by a firm that demands high sales at any cost. New brokers and less successful brokers are especially vulnerable to this kind of pressure. If they don't meet their quotas, they'll lose their jobs.
It's common for management to:
Offer incentives, such as higher pay or status vacations, for selling mediocre products that the firm makes extra money on. Some brokers love the game, others hate what this does to their clients but sell the stuff anyway.
Raise quotas to the point where brokers are tempted to churn accounts -- that is increase buying and selling simply to generate commissions.
Order brokers to sell a crummy block of shares that savvier institutional customers have rejected.
Create a climate of callousness, bypassing out perks and vice presidencies to big producers no matter how unsavory their techniques.
Mislead brokers about the riskiness of a financial product. For example, remember auction rate securities? They were supposed to be as safe as money market mutual funds while paying higher rates. When the market started to fail in 2008, some big firms hid the truth from their brokers and, in fact, pushed them to sell more.
Demand that brokers sell fee-based advisory accounts, even to clients who might not benefit. I recently asked a broker what her most lucrative product was. She responded, enthusiastically, "The big $ comes from fee-based accounts. We get that annually! Got to build the fee-based book of business to reap the real rewards!!!"
So, as I was saying, don't trust your brokers. Talk to them, learn from them, but suspect and investigate everything. When it comes to expensive financial products, "no" is a mind-clearing, money-saving word.
Drafting an investment plan is a work of precision. All the details of one’s financial needs have to be categorized in a short-term and long-term bracket. Accordingly, the investors' instruments of investment have to be selected. All this takes a lot of knowledge and most importantly a lot of time. That is the very reason no one does it for free. Availing services of a good stock advisory firm not only gives a better insight into the financial world but also provides much-needed assistance for making the right choices.
Once you start striking out the options of reliable investment advisors on your list, the list will boil down to only two options - yourself and a dedicated financial advisor. It’s simple, either you do your research or hire the services of a professional investment advisor. In the long run, it pays to spend a little on valuable advice then losing money through uninformed investment choices.
The best SEBI registered intraday tips provider is governed by SEBI. Therefore, these firms are audited on the capital adequacy and infrastructure front. The audit helps to protect investors from financial fraud. To make it crystal clear, by subscribing to Sebi registered stock advisory company is like investing trustfully and this is the reason we have consistently delivered returns through our Bank Nifty Option tips and our clients swear by its precision.
No More Fake Promises- As discussed earlier SEBI ensures all the diligence towards the activities of the registered advisors. This, in turn, avoids the possibility of frauds and scams. SEBI has enforced an Act to govern all the SEBI registered stock advisors. The act defines that to provide the stock recommendations the firm needs to register with SEBI. And once registered with SEBI, the firms cannot make fake promises regarding the higher profitability.
Risk Assessment- SEBI has mandated compulsory KYC and risk assessments for investors before offering services. With this, a SEBI registered stock advisory first evaluates your risk appetite. Due to which investors' safety is ensured as well as capital is also protected.
Apart from the above, the benefits of a SEBI registered investment advisory company, can offer you many other benefits in your investing life. A right stock advisor can accelerate your investment performance as well as can align your investment to your financial goals. However, selecting the right stock advisor is something you need to look into. Because rather than getting yourself into stock market hassles to create wealth, a hassle-free investing life is always preferable. A SEBI registered investment advisor, can let you do the things which you are best at. And meanwhile, he takes care of your stock market investment and creates wealth for you.
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