Four Signal Alerts for New Investors… and What You Can Do!

Have you noticed?

At times when Philippines Stock Market starts experiencing tremendous growth, lots of “experts” begin to rise up with the tide as well. "Bull market gurus" as they say it.
So here comes a warning not to just accept whatever bit of info you see scattering around.
We need to be all the more careful on what to process in our mind especially that a lot of self-acclaimed gurus are now rising together with the rise of the stock market.

Below are some gentle guides to remind you on that.
If you see anything of below, that’s a sign you need to be more alert with what they feed you.
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  • The sign of incomplete picture - those who show their winning stocks but not their losing ones.
This is one of the most common signs you can see - highlighting their so-called successful top picks but hiding to death their mistakes.

Their favorite dialogue is “See what I told you in the last months, now it pays-off”, followed by some evidences of their recommendations in the past.

Well the truth is that they can be certainly right on that.
But assessment of recommendations needs to be more objective.

It could have been better if there’s a regular check up of all their current stock picks thus showing the whole picture and not just singling out a stock or two and hide behind its glory.
Otherwise, it becomes a self-centered affair.

Avoid bad bacteria like that.
So if anytime in your investing career you meet a “guru” who starts capitalizing on his successful picks, you now know your response: “Do you also have losing stock picks?”
Only then you’ll really know.

  • The sign of inconsistency - those who proclaim that they’re long-term investors yet parade movements in their stock portfolio once short-term upswings happen to them, thus claiming their righteousness once again.

These people recommend stocks and emphasize they’re for long-term yet ironically take rides too in current short-term market trends.

That’s just simply absurd.
When the stocks are down, they’re safe because all they have to say is that they don’t care. They’re long-term investors anyway. Well, that’s reasonable.

But when the market tide starts to rise after just a short period of time, they would also go back to that stock and say statements like “those who followed my advice are now enjoying their profits.”

If they’re really serious as long-term, should they really care on that?
Of course not, after all they say they’re long term investors, right? Why take credit into something they've not really intended in the past?

In fact, they should be mourning that the prices have gone so fast that they can no longer pick up their shares at cheaper prices. But you see them like kings proclaiming their own majesty. They say long-term but assess short-term, thus the wrong kind of review.

Remember that proper honest evaluation of anything is not done during the course of actions, it’s always at the finish line.
           
  • The sign of lack of basis - those who give stock recommendations but are silent in their rationale of their picks.

Their language format is this: “You can buy stock XYZ at price A and sell at B pesos.”
Then it ends there.

What you should appreciate more is when someone claims something and lays down his bases of the claim. You then check his line of reasoning in coming up with his conclusion and assess whether they’re in rhythm with the basic core principles you surely know (thus the need for core principles). That way you also affirm and improve your knowledge.

You need to at least have some sort of origin and reasoning on why they have such trading tips and choices. If you ask and dig deeper and they answer back that they can’t go into details, you now know what to do – forget it.

  • The sign of unverified story  - those who spread just whatever rumor.

Technical chartists are grounded with the foundation of Dow Theory, but some people like to use the Philippines version of it called DAW Theory, which tempts people to blindly put their money at risk on the strength of unverified recommendations.

With the various kinds of online social platforms we now have, it’s easy to just come up with anything and spread it like crazy.

Here’s a better thing you can do – validate the rumor by checking the actual price movement of the stock in that trading day. Well, after all, the best time to say whether that rumor is useful is when the stock’s price reflects it in the market.

***
So those are just few that I observed in some of the stock market discussions I see that need special attention. Do you think you have anything to add?

You see the goal of this blog is focused on giving you the basic tools and resources to enhance your knowledge in investing.That's why I urge you to read books in our files section in our facebook group while it's still there. Yeah, it's too many, but what are the things you spend time on that really don't change your life for the better?

Yes, this blog is practically for beginners, and I dream that one day, you’ll no longer be reading this after you’re finally able to come up with your own investing decisions or at least confirm, refute or at least question all kinds of claim you see everywhere.

Enjoy the rest of the week!

Have fun investing (carefully)!

PS: For new investors, download My Maid Invests in the Stock Market… And Why You Should, Too! Download here!

PS2: Find out how you can win in the stock market and change your financial life forever!

Join us in our 2014 MidYear Premier Seminar - Practical Money Management + How to Win in Stock Market.

Deadline of super early bird discount is this May 24 na so reserve your seat now.
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http://www.smartpinoyinvestor.com/2013/05/midyearstockmarketseminar2013.html

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