Townhall
Finance...
Stock Tip: Don’t Take
Stock Tips
By Gil Morales and Chris Kacher
As legendary investor Jesse Livermore once wrote, more money has been
lost by those who take stock tips.
There is a difference between taking a stock tip that has no inherent
or proven logic behind the tip compared to acting on stock suggestions
based on stock market trading strategies that have proven themselves
over many market cycles.
If one is going to follow sites that provide daily stock tips, know the
basis of the tip and know the track record of the tipster. Picking
through daily stock trading tips is treacherous if you dont know what
you’re doing.
Along with stock tips comes the invariable declarations on where the
market is headed.
We see the talking heads on major networks such as CNBC, Bloomberg,
Reuters, and even Fox Business News where Gil Morales is a frequent
guest on such shows as Stuart Varney & Company and the post-market
Bulls & Bears segment.
But his views are based on intensive market analysis based on
historical precedent going back many decades. Our trading and research
laboratory continues to spawn new ideas which are then rigorously
tested.
Any results that can potentially enhance our returns and withstand the
rigorous backtests over not just a few market cycles but over entirely
different eras are then incorporated into our strategies.
Incidentally, no one has ever been able to demonstrate consistency in
predicting the future of the market. Thus, the best way to construct
and manage a stock portfolio is to do it one day at a time.
In other words, the market will give you enough information on a daily
basis so you can adjust your exposure to the market on the long or
short side accordingly.
In fact, the reason why many can miss whole bull and bear markets is
because investors get overly attached to one or two aspects by the news
media and become wedded to the ideas, such as the sky is falling
mentality that prevailed in March 2009 yet proved to be the bottom of
the stock market.
Or it could be the more recent idea of the rise of the emerging
creditor nations such as China and India vs the demise of the debtor
nations like the US, UK, and Europe, or the idea that the US is on the
path towards bankruptcy.
While the situation in the US is not good, should bankruptcy occur, it
is probably many years off. So an investor needs to be focused on the
NOW and not take a view of the world years down the road when there is
so much that can happen between now and then.
So what is going to happen or not happen years from now is pretty much
irrelevant in determining what to do NOW.
So if one is going to walk into the world of investing armed with scant
information and be influenced by a stock tip, at least understand where
the stock trading tip originated, the nature of the tip, and whether
there is any track record of the person giving the tip.
Otherwise, we believe it is always a much more sound approach to
operate solely on the objective price/volume information that the
market and leading stocks are providing in real-time, every market day.
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