Don’t Ever Take Cold Calls

July 16th, 2008  |  Published in Investing

In our current economic climate, it’s easy to take a call from an unknown broker offering some hot stock tip. They’ll sometimes say “check out company XYZ, they’re about to be acquired or announce some hot news that will make the stock triple!” Of course, you could always buy the stock on your own but the broker says that by going through him, he’ll bring you some of these hot offers every single week or month. It’s a tempting offer right? I mean my stock portfolio’s been down, the broader market’s been down 20% since the high last year, so everyone’s looking for an edge.

Don’t. Answer. The. Phone.

Here’s why those offers are likely not legit:
If they were legit, why doesn’t the broker invest in it? If the broker could triple their investment ever few weeks, $1000 becomes $3000 and then $9000 and before you know it the guy should be a billionaire right? If they can make more money selling you stock than in the investment itself, it can’t be on the straight and narrow.

No one can see the future. I don’t think this needs any more explaining. 🙂

Insider trading is illegal. Let’s say this broker does have its hands in all sorts of business and is privy to insider information. Insider trading is illegal, especially if they tell you they know something will happen because of a “hot tip.” Any money you make as a result of insider trading is forfeit and you could go to jail.

Don’t let greed cloud your judgment!

  

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