The Hottest Investment, a case study

The hottest investment tip which I am going to reveal here is one of the best kept secrets of the investment world.

Rahul completed his graduation and looking for a job. Before appearing for the interview he wanted to know the best tips for attending the interview. He collected some tips from his friends; some from his seniors; and some more from his relatives. One day he met a placement consultant and asked him for some more interview tips.

The placement consultant looked into the eyes of Rahul and gave him a form and also asked him to fill up the details. Rahul was wondering what for this form is. The form has got some questions to identify and analyse the strength and weakness of the candidate. While filling up the form Rahul got the whole idea. That is “the interview tip is not somewhere outside; It is within him”. Identifying his strengths i.e his skill sets, his knowledge, his interest, his aspiration and applying for a job which demands those strengths. Rahul was moved. Rahul was transformed. Thereafter he never asked for any interview tip from anyone.
Similar to job search, making investments is also an inside-out approach. “Inside-Out” means to start first with self; even more fundamentally, to start with the most inside part of self — with your financial goals, your ability and appetite to take risk, your other existing investments ……

So an investment suitable for one person need not be suitable for another. Because they may have different goals, and risk levels. As there is no common investment for each and everyone, obviously there can’t be an investment tip which is common to all.
Then how do these investment tips exist? There are lots of people, who don’t want to follow the regular investment process and looking for a short cut. So there is a demand or market is available for investment tips. It is difficult to sell an investment by following the correct process. But it is too easy to sell an investment by giving something in the name of a hot tip.

Where from these investment tips come? Media, stock brokers, or other investors. Primarily, it comes from the stock brokers. Even in media, these stock brokers only provide these tips. The other investor could have received the tip from his broker.

If you are going for shopping, you decide what to buy or seek the advice of shop keeper for what are all you need to buy. Can anyone rely on that advice? Similarly can anyone rely on the common advice by a stock broker?

Stock brokers provide tips mainly for trading; not for investments. Investment is entirely different from trading. Trading is for short term. Investment is for long term say 5 years and above. Stock broker earns commission out of your transactions. A trader will do frequent transaction so frequent commission. An investor will buy and hold and will not do regular transactions. So no regular commission.

That is why Benjamin graham, the investment guru of Warren Buffet, says “the investors make money for themselves and the stock traders make money for his broker”.

Investment tips are all mere traps. So in reality there is no such thing as INVESTMENT TIPS.

About the author

K Ramalingam wrote 28 articles on this Website.

Founder and Director of Holistic Investment Planners (P) Ltd., a financial planning and wealth management company. An M.B.A., graduate and CFP certified professional having 11 years of experience in investment advisory.

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