海角大神

Every once in a while, I鈥檒l find myself in an airport or somewhere else where a personal finance or investment program is on television. I鈥檒l watch it for a bit and usually find myself frustrated because, every time I watch, I see a bunch of red flags that indicate that I should take what鈥檚 being said here with a grain of salt and that, if I actually want to utilize any of it, I should do my own extensive research.

Here are the five red flags I see most often with money advice.

Outrageous returns are claimed.聽People make statements that imply that you鈥檙e virtually guaranteed a very quick return that surpasses any legal investment. Whenever I hear an investor saying that a stock sitting at 20 is 鈥済oing to 45 in the next few months,鈥� I immediately start getting suspicious.

If someone says that they expect some degree of increase in value in a stock, I might believe that person, but over-the-top claims 鈥� particularly anything that beats a rate of about 8% annually 鈥� immediately set off warning bells for me.聽

Cherry-picked hindsight is used as 鈥渆vidence鈥� for their claim.聽When someone pulls out a specific investment pick that they made a year ago as evidence for how good they are, I immediately begin to doubt them. Sure, they probably did correctly pick that this one investment would double in price, but I鈥檓 also willing to bet that they made dozens of picks that didn鈥檛 return anything near what they predicted 鈥� and they鈥檙e choosing not to share that.

I have far more respect for investment counselors who share all of their picks and encourage people to judge them based on their whole track record. I鈥檒l pay聽far聽more attention to someone who made 50 investment picks at the start of a year that earned 10% in a year on the whole versus someone who just points out one pick that made a 100% return. That single pick is basically worthless.

They push specific investments to the moon.聽This screams 鈥渃onflict of interest鈥� to me, and it鈥檚 one of the reasons I鈥檓 always wary of anyone pushing me to a specific investment without deeply understanding what I鈥檓 looking for and directly relating that to the investments they鈥檙e showing me.

Anyone who just says, 鈥淢an, this investment is聽hot聽and you need to buy in聽now鈥� is welcome to join my 鈥渋gnored鈥� list.

The evidence they provide for their tip relies on chart analysis.聽Whenever someone pulls up a chart of the history of a stock and starts drawing vertical and horizontal lines on it to indicate where it鈥檚 going, I tune it out.

I have seen no evidence that 鈥渞esistance鈥� or 鈥渇loors鈥� or 鈥渃eilings鈥� mean much of anything going forward. It鈥檚 easy to find patterns in a lot of old data, but it just doesn鈥檛 really pan out going forward.

The evidence they provide for their tip relies on hard-to-verify information.聽Sometimes, people will point to 鈥渞umors鈥� and other weak evidence to buy a particular investment. A new building is going in down the road from this piece of land, or this company is about to launch a pretty cool product.

The problem is that most of this type of information is vapor. You can rarely track down a hard source for it. Sure, sometimes a hard source does actually appear eventually, but just because some claims do come true doesn鈥檛 validate investing your money based on unverifiable whispers.

The shocking thing to me is that investment radio, television, magazines, newspapers, and websites all do these things over and over again. If you start digging into investment news, it only takes a few clicks to start seeing these red flags going off everywhere.

For my investments, I stick to safety. I either buy something tangible (like real estate), something with a very long provable history (like a strong blue-chip stock that pays dividends), or an index fund.

That way, I don鈥檛 have to pay attention to all of these red flags.

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