Taking a stock tip from a friend

Once in a while, showing your interests in stocks to friends arround you, close or not close, you will get stock tips from them. Usually, the stocks they recommend have some sort of connection with them, either their uncle, dad, nephew, brother-in-law, grandfather or auntie has bought them. But when you start asking them the question have they bought them, what comes back is usually a disappointing answer.

Stock tips from friends are not necessarily bad, but it's those speculative or high-priced ones that you have to be wary about. I've read alot from people's experiences that these kind of stock tips never turn out good. Try to imagine how the 'stock tip' came all the way to your friend, regardless of their intention. It probably originated from a broker or a company's representative trying to get people to buy their stock. And from one person to another, the stock is sent along until it reaches you, you probably being the 10th person down the line to receive it.

You hear all these amazing stories about the stock. Like how they are going to profit handsomely in the near future, how its going to be the next Microsoft, or how your friends(most of the time their friends) have profitted from the stock. However, it is for these reasons alone that when you hear them they should already be in your 'no' zone. Never, ever buy a stock with hope of getting an amazing return that has only blue sky to guarantee it. Those stocks are purely speculative and most people lose out in speculative situations. On the other hand, if someone else has already profitted from the stock, what does that mean? It probably means the friend has sold when the stock has sky-rocketed and you are there about to buy at the mountain top.

Be very, very wary. Sometimes it could be great ideas too. But great ideas usually come in the form of a related experience, where they bought the goods and had a great time. They rarely come in the form of a inclination to get you to buy a stock.

Putting all these behind, it is good to remember that if you do your homework, you don't have to worry about whether it is a good stock or bad stock.