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Getting started
Share tipsters exposed
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You would be amazed at the strenuous objections we have received to publishing some of
the material below. Read this carefully. You need to understand it. |
Share tipsters are opportunists…
Stock market tipsters are an opportunistic bunch. Some work for newspapers, but most for specialist subscription-only newsletters. They have an influence that may, or may not, be proportional to their track record.
Share tipsters are often nice guys (and gals). But even when highly acclaimed,
they are usually far from being financial geniuses. Their usual background
is financial journalism, which requires the ability to summarise complex arguments,
but not necessarily financial skills or any serious level
of numeracy.
Some tipsters will have worked in the City of London or on Wall Street, but this does not in itself add value to their investment advice. The old adage applies, if they know so much about picking stocks, why are they not investing their own money for a living?
Their main qualification is the ability to write
Many of these pundits do not even have many contacts. They lift their tips from secondary sources, rewriting in their own words, perhaps combining material or adding a fresh twist to make it appear original. The trick is to write convincingly, perhaps entertainingly. It is not based on how many recommendations turn out well.
As a crucial part of his presentation, the tipster will often hint at City contacts and confidential tip-offs. Alternatively, he may represent himself as an advocate for the man in the street, sifting through the muddle that emanates from the City, and coming out with solid, recommendations.
If a tipster wants to keep his or her reputation intact, it can pay not to be associated with one web site or newsletter for too long, as its tipping record will at some point go through a lean period. Many tipsters operate anonymously. As an alternative strategy, ambitious tip sheet writers try to develop a high profile name. They infuse their personality into their writing.
The tipster is at his most convincing – and his most suspect – when he holds shares in the company himself, which is sometimes the case. His newsletter may or may not declare this interest in the small print. Other tipsters have never invested directly in shares in their lives.
The claimed track record may be misleading
The tipster will typically claim a sound track record for forecasting share tips or market movements. To substantiate this, he may cite the successful tips and gloss over the failures. When a tip is given prominence in a popular newsletter, the market-makers increase the price. Other tipsters get wind and steal the idea. It is a vicious circle which can send up the share price temporarily.
Share tips also appear in newspapers. The journalists will often have received
their tips from a PR consultant pushing the company. They are doing him a favour
in return for pushing more stories their way. But the regulatory climate has
become less favourable to the less savoury end of such activity. In early 2006,
the Department of Trade & Industry successfully prosecuted the City Slickers,
two journalists, for having bought shares ahead of tipping them in a national
newspaper and selling out after publication when the tip had pushed up the
share price. The other big
source of share tips are the Internet bulletin boards. Do not rely on these.
Many who post messages have an ulterior motive. I know of one
stockbroker who took action against an individual who had been posting
misleading messages, and the matter was settled out of court. Since then,
some financial
Web sites have committed more resources to policing their bulletin boards.
Caveat emptor prevails and, if you follow the message boards, check any startling
revelations with the company itself or a sector analyst.
For more about how tip sheets really work, including which are the good ones
(and which the bad), read Everyone's
Guide to Online Stock Market Investing by Alexander Davidson, published
by Kogan Page, 2001.
| If you can't beat 'em, join 'em
If you’re interested
in the stock market or investment, you may consider becoming a professional
writer or journalist on the subject yourself. First
get yourself a decent grounding in the basics. Read How The City Really
Works by Alexander Davidson, published by Kogan Page.
Next, obtain financial
publications and study them. Work out an article you could write that fits
the content and style. Ring and pitch the editor with
your idea.
Professional journalists do only commissioned work, and agree on its substance
in advance. If you can pull it off, this is the best way. But as a novice,
you may have to contribute speculatively.
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