Don't Chase "Hot" Stocks

One of the worst ways to invest is to listen to golf-course tips and doctor's-lounge rumors and act on them. But even doctors savvy enough to avoid these traps will buy stock on a hot tip from their broker. It helps to remember that, if your broker knew for sure which way the markets were heading, he/she would probably be enjoying an early retirement

“Wall Street people learn nothing and forget everything.”—Benjamin Graham

One of the worst ways to invest is to listen to golf-course tips and doctor’s-lounge rumors and act on them. But even physician-investors savvy enough to avoid these traps will buy stock on a hot tip from their broker.

It helps to remember that, if your broker knew for sure which way the markets were heading, he/she would probably be enjoying an early retirement instead of working for a living.

In a bull market, stock picking is easy. Now that the bears are in charge, the job gets a lot harder. The best tip is to remember is the advice from investment giant Warren Buffett, who has often pointed out that the stock market is manic-depressive in the short-term. It’s prone to wild swings up or down and there’s hardly any way to forecast the direction that tomorrow’s market will move in. Keep that in mind the next time your broker calls you with a hot stock.

For a better understanding of investing, read the profiles of The Greatest Investors at Investopedia.

382 daysLength of the average bear market.

721 daysLength of the average bull market(Stock Trader's Almanac)

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