Regular readers know that I don’t hand out personalized advice to anyone, and although I think most of my regular readers are aware of why I do this, IÂ thought it will be a good idea to write down my rationale clearly, and also point people to this page when they seek such recommendations.
I didn’t plan to do this post but I’m getting more and more of these kind of emails nowadays, and I think that has something to do with where the market is right now, and how it has attracted quite a few new entrants to it. Also, I hope that this will nod you to evaluate others who are handing out advice a little more critically, which in my opinion will be a good thing.
With that said, here are my main reasons for staying away from handing out recommendations.
1. I’m not a professional: This is by far the number 1 reason. I’m not aÂ professional and I don’t do this for a living. I don’t feel that I haveÂ enough knowledge to advice people on what they should do. I try to stick to Â facts in my post, and then when there are comments I try to answer themÂ factually as well. If you ask me what the Post Office Monthly Income Scheme is – that’s a much easier and factual question for me to answer than to tell you whether that’s right for you or not. I try to stick to those kind of questions.
2. You are unique like everyone else: Different people have different needs,Â and even if I felt I knew something was right, there is normally no way toÂ find out if it is right for you without getting into a lot of details withÂ you.
You can see some very good examples of this on the comments of the NPSÂ post. You will see someone going after me because NPS is a bad product andÂ I’m not saying so and then someone else going after me because NPS is aÂ good product and I’m not recommending it.
Both these people come from different perspectives and I’m sure what theyÂ are saying is true for them, but probably not true for “everyone” else. When they find that their experience doesn’t match with what I have to say they take offense to that, and I can totally understand that. But how can you blame someone for doing a thing, and then not doing Â the very thing?
A lot of this is contextual I’m afraid, and gathering context needs a lot more time and effort than is possible on this forum.
3. I really don’t know: This is true more often than I’d like to admit. But in a lot of cases I simply don’t know. Â The L&T Finance IPO is open right now so let’s take an example of that – should youÂ subscribe to the IPO or not?
Let’s think about the answers for a minute. If I say you should subscribe toÂ it – what does that mean? In my mind it can Â mean only one thing – that it willÂ open at a premium and will not go down below the IPO price ever, or at least forÂ a very long period. If that’s not true, then why not wait and buy it when it lists at a discount.
On the other hand, what if I say don’t subscribe to it? That means I expect it to go down with listing at which time I can buy it for cheaper or it could mean that the company is not worth investing in at all.
I don’t know of any way to predict these outcomes with reasonable accuracy – I simplyÂ don’t know.
Occasionally, this answer confuses people, they ask how are others recommending stocks and IPOs?
I don’t know how they are doing it, but I’m fairly sure why they are doing it.
Because there is a market for it.
The number of people who want stock tips, and recommendations outstrips the number of people who understand that these don’t work by probably 1,000 – 1.
Anyone who can tie a tie can give stock advice, and sometimes even that’s not needed. There aren’t very good ways of measuring how effective someone’s advice has been, and that’s how most of these people stay in the game for so long. Not by being right, but by not getting caught.
I’m not saying everyone falls in this category, but a lot of people certainly do. I’m sure there are people who predict very well, and once you identify them they become a very valuable resource for you as well.
Unfortunately, I have no tips or recommendations because I simply don’t know.
I can go in with a few more reasons, but the theme remains the same. I don’t think managing money, and finances is very hard to do, but at the same time it’s not as easy as to get a one line answer and then buy insurance, gold or stocks using that information. There can only be rewards if you put in time and effort in the research.