Tag Archives: investment groups

Why I Never Recommend Stocks To Buy

I’ve only been investing a short time but as I’ve been trying to learn what I can about dividend investing, I’ve been coming across many posts and tweets regarding what stocks to buy. What I haven’t seen is how to decide which stocks to buy. It would go a long way if those that post stock recommendations would also give an explanation on how and why they come to recommend that specific stock. There’s an old saying:

Those people posting their stock recommendations without any explanation or method of how they got there are giving out a “fish”. Some people will blindly follow but never know why. Their only reason for selecting that particular stock is that “someone recommended it”. Hmm. How does that help you go forward? How can you move forward to deciding which stocks to invest in next? How well do you know the person giving the recommendation? What is the recommender’s agenda? Lots of questions come to mind.

We also have those that recommend lists of stocks to watch. Watch for what? What are we supposed to look for? Why should we be watching these stocks? Again, what is the poster’s agenda? When I get recommendations from my broker/financial advisor, they are based on my financial goals and broad selection criteria. Without an explanation of how they came to recommend these specific stocks you could miss some opportunities because you may not be looking at the same things that they are because their strategy is different than yours.

But if you give people the methodology of how you came to recommend these stocks you now are at the point of “teaching to fish”. Because now they can try to replicate your steps and maybe modify them to their strategy and decide on their own which stocks to buy. Telling me to buy a specific stock because it pays extremely high dividends is not useful by itself. There is more to my strategy than just dividends paid out. I’m not a one dimension investor.

Whenever I see the stock recommendation postings I always wonder “What is the poster’s agenda?” What are they after? I won’t recommend stocks. I will, however, detail a decision that I made about a specific stock or between 2 different stocks. I’ll explain what I looked at and what data was important to me and how my decision falls within my investment strategy.

The Best of Intentions May Not Be Enough

On Friday I posted about being careful about following advice that you are given about investing. Well, today I ran into another person who had advice for me about investing. There was nothing malicious or devious about his advice. He probably had good intentions. However, he never answered the question that I originally posted to the group. His whole posture in answering my question, which really had nothing to do with my question. His advice had more to do with trying to become my unofficial financial advisor that I didn’t ask for. This person was touting value investing with dividends being secondary, I made it clear in my responses that my focus was on dividends and not share prices because I want to avoid risk whenever I can. Which I why I prefer funds over individual stocks.

So, if I follow this gentleman’s advice I would now be following HIS strategy and not MINE. Be especially careful when you post a general query in investment group forums because you will get all of the so-called experts that will respond to you like a real financial consultant who has spent a considerable amount of time with you and has a detailed knowledge of your financial situation. Be extremely careful. This not to say that investment groups and forums should be avoided. No, you can gleam some useful information from these sources. Just be very cautious with the information you get.

As for me, I’ll remain a member of the group but I’ll no longer actively participate by asking questions. I’ll try to figure things out on my own or seek information from a professional or wait and see if anyone posts a similar question to the group I have no time for unsolicited advice where the full detail of the financial situation isn’t known. You will always encounter those that want to flaunt their “expertise” and look for opportunities to do so without being asked. They tend to read more into a question than what was intended. It’s called The Dunning-Kruger Effect.