Saturday, April 12, 2008

How Free Are Free Tips?

A few days ago I met a friend who I had introduced to investing several years ago. I started investing when I was 16 and I remember a few of my friends getting started after I told them what I was doing.

I hadn’t started with a lot of money and I remember how a large part of my time was spent learning and trying to find out more. However this friend of mine would always tell me that he knew some ‘punters’ and they provided him with ‘hot’ tips. He used to tell me that markets are all manipulated and I am wasting my time by doing research and reading so much. Most of the times the stocks he would suggest would run up 20-30% within a few days, however I still would not invest in them.

I wanted to study and learn and be sure before I invest. Fortunately or unfortunately several stocks I would invest in would either not move at all for a few months, and in some cases prices would even go down. I would select these companies after spending a lot of time learning about them. However I knew from studying about the history of stock markets that good companies always make good investments in the long run provided they are bought at a good price. I wasn’t wrong- those stocks did reward me in the longer run.

He would tell me that if I wanted to make quick money I need to stay in touch with ‘hot’ stocks and just invest in them. I continued following my investment strategy or investing in value and fundamentals, and by the grace of God it hasn’t been too bad over the years.

Unfortunately for my friend things haven’t been that good. He told me how he did make a lot of money, but after that he became very over confident and started investing n futures. He made even more money after that. However the recent crash caused not only his capital to be wiped out, but now he is heavily in debt. He told me how he will never invest in his life now as he has learnt his lesson.

I explained to him that till now he hasn’t been investing, but gambling his money and he needs to start learning and investing in knowledge before he invests his money. I know I keep emphasising this all the time. But it is a simple truth if you want to create wealth for the long term. In our business the more knowledge you have the more wealth you can create. In fact not just in our business, but in any other field of life.

Once again when markets start to rally, millions of people will forget about the risks involved with following supposedly ‘free tips’ and not investing in knowledge. As
Kishore commented- those ‘free tips’ are very expensive. They cost him over Rs. 3 lakhs. Millions of retail investors end up paying lakhs and crores of rupees for such so called ‘free tips’ because most of the time such tips are motivated and spread by manipulators through their chain of brokers.

Life is simple. It is just that all of us need to be reminded about some basic facts on a regular basis. I want to motivate all of you to hunt for knowledge and learn as much as you can. This blog will of course not give you all the knowledge you want and is just there to motivate you to keep searching. There is an immense universe out there- go explore it and don’t forget to have fun while you are at it! My search for knowledge is eternal.

Keep smiling and have a great weekend!
Happy wealth creation!

Yogesh Chabria
© Happionaire

I loved what Jaiz had to say about entrepreneurs. Do check it out here.


sunita said...

Lovely post Yogesh. As they say their are no free lunches. BTW just a suggestion- why don't we organize a lunch with all fellow Happionaires? I would be coming to Bombay next month, I'm based in California. We could all get to meet each other and have fun.

And Jaiz I too loved what you said. Torch Bearers.

sunita said...


g. said...

Great post Yogesh. These reminders are essential from time to time.

Keep up the good work!

Info-hunter said...

Hi Yogesh,

What you told about value investing is true....

But, to me, price manipulations in stock markets seems a game from big players.

Many share prices go massively up or down without any change in their fundamentals and news. Even for some companies, even without change in their fundamentals, share prices were down by 20-30%.

It becomes then difficult to small investors to pick right entry price and still is not aware how his investment will flare in next coming days.

Aarti said...

Markets are all manipulated? Are the stock markets really ethical? I dont think so.
I have an interesting incident to quote. In the first quarter of this year when the mkts fell, I received a phone call from a known person who advised me to sell all my investments in the post lunch session as the mkts will be going up after that and I would be able to recover some of my money. That day mkts were considerably down. But to my surprise and shock the mkts started moving up after lunch and not only recovered the downfall of the day but ended much higher. Though I didn't sell my stocks that day,which I till date regret.

Any comments??

The Happionaire™ Blog said...

Aarti I feel it is always better to have control ourselves. How long can you depend on others for your investments?
How can anybody be so sure about where markets are headed? What if it was just co-incidence? Personally I feel if anybody can be 100% sure, they will end up having access to unlimited wealth.

It is best to think for your own self and have the power. These are just my views which have personally worked for me and others may surely have other opinions and share their ideas.

Keep smiling!