Are you looking for the latest stock tip or corporate rumor that you can take advantage of to help boost your portfolio? Tips and rumors will boost your portfolio all right. However, they won’t boost your portfolio with cash. Instead they will boost your portfolio with laggard, under performing stocks that will suck hard earned cash right out of your bank account!

Why are tips and rumors bad for your stock portfolio? Tips and rumors are bad for your stock portfolio for many reasons. The first reason why they are bad for your portfolio is because they take your focus away from where it should be and that is spending time properly and effectively researching stocks using solid fundamental and technical analysis. When you have a hot tip, you get lazy and feel you don’t need to “waste your time” doing research. All you need to do is take advantage of the hot tip. However, buyers beware, because that hot tip might just burn you in the end.

A second reason why tips and rumors are bad for your portfolio is because you have no idea where the source of the information for that tip is. The person providing the tip could be someone that is going simply on a “hunch” with no solid information to back it up. The person providing the tip could have absolutely no clue what he or she is talking about. The person providing the tip could own the stock and want other people to buy it to cover his or her losing position. The person providing the tip could have access to illegal insider information and if you execute a trade based on that information, you can be arrested and thrown in jail. Ask Martha Stewart!

A third reason why tips and rumors are bad for your portfolio is because they simply don’t take into consideration other factors that have a stronger influence on whether a stock moves up or down in stock price. For instance, did you know that 75% of the stocks in the stock market will follow the general trends of the index? Therefore if the general indexes are trending downward and you get a tip that a certain stock is going to go up, there is a 75% chance that this tip will be wrong and you will lose money.

The best tip you can find is to ignore tips all together and do your own research. At the very least, if you do come across a tip that sounds interesting, at the very least, make sure you properly research the stock’s fundamentals and technical components before acting on that tip. One of the biggest reasons why people lose money in the stock market is because they act on tips without doing proper research. You don’t want to make the same mistake. Investing is a process not an event. The chances you have of getting rich overnight on a good stock tip are almost as bad as the chances you have of getting rich by winning the lottery. If you want to get rich in the stock market, there is nothing that replaces good old fashion research.

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