Sunday, November 9, 2008

A lemon will always be a lemon

I read the "Weekend Today" and came across an article by Richard Hartung "Behind the Rosy Forecast". He talked about those analysts who need not be held accountable for all the wrong predictions and analyzes made. They can upgrade a company today and downgrade them tomorrow without fear of losing their job.

He has given 2 advices which I really enjoyed reading.

1) Look beyond the sales pitch. Rather than just listening to a rosy story or reading the headlines, ask about the analyst's record with forecast in the past...
No matter how shiny a lemon may looks and regardless of what anyone says about how bioengineering has made it sweet, a lemon is still a lemon, so too it is better to taste the lemon, so too it is better to check out the investment and verify that the story is credible.

2) Do some homework. The basics are to review the overall economic outlook, evaluate the company's industry and assess its financial statements. In considering a unit trust, look at how it held up in the bad times like 5 to 8 years, see how the fund managers have been running it and look at the components of its core investments holding.

Well the conclusion is "Do your homework and invest with your eyes open. If you lose money, its nobody but you to blame."


Anonymous said...

That piece of advice can also be used to evaluate IFA.

Look at their track record.
Have they been making money for themselve or their clients.

Anonymous said...

The adviser is responsible for any minibomb.