Many of us have heard the old joke in which a man leaves a waitress a great tip written on a napkin “…Don’t Smoke!” This can be very true in the world of stock tips. Everybody with money in a given stock has a good stock tip for you, that being to invest in the stock that he or she owns. The simple reason is that the more people buy a stock the more its worth. This means that every stock is a tip for someone. Nevertheless, does that mean that it is really worth more?
The Brightest Bulb
For most individuals investing in the stock market the dream is to buy a stock that increases in value by a factor of 5 or 10 times all at once. To invest $10,000 and realize $100,000 all at once would have to be the dream of anyone on the stock market. Hot stock tips would seem to be the key. There is an entire investment field devoted to hot stock tips, the world of the day-traders. These investors will look for stocks that they believe will rise sharply in value and buy them with the intent of selling them as soon as they increase, hence the term “day-trader.”
This is the fast, exciting part of the stock market. What most never see are the fortunes that are lost and how fast they evaporate. Whether you are speculating on the scrap gold price or on a stock, you need to understand the volatility of the market. One of the hottest stock tips was a company called VA Linux Inc. When the company went public, meaning that they offered stock in their company to the public the initial price was $19. Three days later, it was over $400! This was one of the hottest stock tips in history and a great deal of money was made, and lost. The owners of the company became billionaires over night, and then just as fast as it increased, it dropped.
The Tortoise
In the race between the tortoise and the hare, the slower tortoise wins. In the case of VA Linux, those who bought the stock after it had started its rise held it when it started to drop believing that it would continue to rise. Those who bought when it was $200 waited until it reached its peak and to sell, but when it dipped, they held on hoping to make their profit. They lost more and more as the stock dropped and many lost it all. This was one of the stock tips that are so “hot” that it burned many investors; the best stock tips are your own common sense.
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