Beware the "Hot Stocks Syndrome"!

Beware the "Hot Stocks Syndrome"!

To know whether to place much credence in any financial advertizing, infomercial or sales literature you are reading, you must learn to automatically do several things.

First, consider the source. Is the writer trying to sell you something? If you get a shiny brochure in the mail with a "can't miss" opportunity involved, just pitch it. If you can hit the trashcan, you can't miss.

If there is an invitation to a free "seminar" with a free dinner, don't be the lamb going to the slaughter. Those free dinners can be the most expensive meals you will ever eat.

If the pitch, however it comes to you is a little extreme-sounding, as in, "Stop losing money!" you can bet there's an annuity involved.

If the pitch says, "you can get (most) of the upside of the stock market, with a guaranteed return!" then it's most likely some kind of heavily-commissioned insurance product or perhaps an equity-index annuity, which can also be rather heavily-commissioned.

The harder they are selling the thing, the direr they are making your future without this product look the more they hope to make from selling it to you. Caveat Emptor. Do not bite.

If you are old and not financially well-informed, you still probably have pretty good instincts. Trust them. If the salesmen make you feel obligated or pressured in some way, well, that is low and unethical. Do not deal with such people. Talk to the people you know best. Talk to your attorney or accountant. Ask them if they can personally recommend reputable people to deal with.

While there may be things which you need to do to address financial questions or concerns you have, there is almost never a need to make a financial decision with major impact on your life "right now". If a financial product or investment is good now, it will be good tomorrow or in a few days. Use the internet to look up information on the company or product being pitched to you. It can wait long enough for you to make a careful, unpressured decision. Just do make the decision, even if it is to spend a little more time before committing yourself. Another deal will be available.

Sure-Fire Day-Trading Systems! If the system is so good, why isn't the vendor a billionaire? If he's already made his millions and is selling his system now so that others can get in on this great thing, well, why isn't he giving it away if he's so benevolent! If it worked, he wouldn't be letting the secrets get away from him.

Gold! Gold! Gold! Argh! Argh! Argh! If you want some gold, buy GLD or IAU. No markups for him.

"Secret stock charts tell the future!" I don't think so, unless the future is a luxury condo in Boca Raton for the seller if you and others buy.

"Silver is about to go sky high!" Maybe. Maybe not. If you want silver, you could buy some SLV.

"The dollar is about to collapse!" see silver.

"Worldwide Financial Armageddon looms!" If it doesn't happen, where do I find you? Down the hall from the stock charts guy?

"I made a fortune in commodities and with my system you can too!" There's an old joke about how anyone can make a small fortune speculating in commodities. You just have to start with a large fortune.

These pitches all seem so ridiculous, but bright people really do fall for them. Admirable people. Doctors. Lawyers. People who have studied, worked and achieved. Why?