Monday, April 14, 2014

Market Wrap-up for Apr. 14 – Investment Advice You Should Always Ignore

The investing landscape is a virtual minefield of bad advice, with unqualified would-be prognosticators lying in wait, ready to blow up your portfolio with terrible market opinions. Here are four types of people you should never listen to when it comes to investments.

1. Doomsday Newsletter Guy

If you’ve been around the markets for a while, you’ve likely received some solicitations (or at least seen web advertisements) for services proclaiming that “the end is nigh.” These sensationalist publishers were the ones who predicted that gold would hit $10,000 an ounce, the Dow would go to zero, and basically called for the end of civilization as we know it. These are nothing more than scare tactics by snake oil salesmen and can always be safely ignored.

2. Your Cousin/Sister/Uncle/Grandson/Friend

A concept known as “The Fool’s Dilemma” dictates that people who know the least are often the most cocksure, while the smartest, most well-informed folks are full of doubt. You’ve probably heard some very strong investment opinions from a loved one, but unless your relative is a full-time market analyst, why would you listen to their opinions at all? I’ve heard way too many horror stories of wannabe market experts gambling away a family member’s life savings. There’s nothing wrong with saying “Thanks, but no thanks.”

3. Random Person on Twitter/Elevator/Golf Course/Subway

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Despite their lack of sophisticated market knowledge, at least your loved ones have your best financial interests at heart. The same can’t be said for a random stranger who offers you a stock tip. If I were rating the unsolicited advice of strangers in general, the phrases I’d choose would range from “pretty bad” to “potentially catastrophic.” So, you get the idea. Avoid at all costs!

4. Just About Anyone on Television

The era of business television is long past its heyday. Before the Internet, you used to have to watch CNBC or call your broker to get instant stock quotes. Now, real-time market quotes and other facts are just a click or a tap away.

Occasionally, business television will feature a qualified market mind with some prescient or timeless advice. Most of the time, however, the airwaves are jammed with ill-informed media types arguing about things they know nothing about. Reporting facts is a thing of the past – all you’ll get now is a steady stream of conflicting and equally useless opinions designed with only one goal in mind: generating higher ratings.

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