Stocktake: The dangers of stock tips
Giving investment tips to investors without knowing their circumstances is ‘reckless’
Just as you shouldn’t recommend quack therapies for cancer, you really shouldn’t be giving stock tips. Photograph: Getty Images
Investors are often cautioned to ignore stock tips, but financial blogger Joachim Klement of Fidante Partners suggests investors adopt a related but different new year resolution – stop giving stock tips.
At parties, says Klement, investors often ask him for stock recommendation. He typically responds with multiple questions over their financial goals and their portfolio and so on. Typically, the questioner soon makes a “lame excuse” and leaves; both parties are happy the conversation is over.
Jokes aside, the problem is an investment can’t be evaluated in isolation, says Klement. It must fit into an investor’s existing portfolio and fit their goals and ability to take risks.
Consequently, giving investment tips to investors without knowing their circumstances and goals is “reckless”. If you’re not a professional investor, you’re making an even bigger mistake, acting like someone “who has read about cancer on the internet and now provides tips to other people about this new miracle cure for cancer based on vegetable juice and tea”.
Giving advice makes us feel good and signals that we care about the person, says Klement. However, just as you shouldn’t recommend quack therapies for cancer, you really shouldn’t be giving stock tips.