Posted by forex at 8:16 AM
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1. Read the fine print. At the end of many stock recommendations is a lot of very fine print. Often, buried in the middle of all that print, is information saying that the person or company making the recommendation has been paid a fee to do so. Never follow the advice of anyone paid to make a recommendation, no matter how good the stock sounds.
2. Ask your stock broker who owns the stock being recommended to you. Sometimes when a stock broker calls you and tells you about a 'sure thing,' the truth is that his brokerage company bought a large block of stock at a discount and is now trying to push it on clients by saying that 'research' indicates it is a good stock. Be cautious even when a broker gives you a tip.
3. Check out a tipster's track record before paying for stock advice. Do not pay for advice unless you can sample actual advice for at least 2 weeks for free.
4. Be especially cautious when receiving tips on penny stocks (stocks trading under $5 per share). Often an individual or company will buy a large block of a penny stock and then plant a false news story to encourage additional investors to buy into the stock. The sudden interest temporarily drives up the cost of the stock, allowing the investor who planted the bogus news story to dump his shares at a profit before the stock drops back in price.
5. Look for individuals or companies that have been around for a year or more and have a good reputation. Companies such as Motley Fool have an excellent track record and no ax to grind when it comes to recommending stocks.