Beware of Tips Base Advice

Equity market participation in India is still below 5% w.r.t. the total population and this includes both direct equity and indirect equity route via mutual fund & insurance etc. There are mainly three kinds of participants in the equity market:

• Investors (short term & long term)
• Traders
• Speculators

The majority of people who take equity exposure either have a short-term horizon (< 1 year) or intraday traders or speculate in the market to get instant gains. Very few people invest in the equity market having a decade-long horizon. In fact, for any shares allotted via IPO, 90% of retail subscribers sell on day one and happy with listing gains.

Because of this mindset, the share market is still considered a place for gambling for many. People who want to participate in equity have only one thing in mind to earn maximum profit as earlier as possible. And because of this quick money tendency, many advisory firms started giving hot tips to their clients. People avail of this paid service subscription and start getting daily tips. However, the majority of them make losses eventually. They forget the basic facts that the stock market is not a place for speculation. It has the potential to create wealth in the long term on a consistent basis. Moreover, some of them even go ahead and start trading in derivative (F&O) segments on a tip basis. 

Always remember the basic rule of equity investments:

• Retail participants should either go with the mutual fund route or acquire knowledge of fundamental & technical analysis first.
• Take a long-term (>5 years) view of the equity market.
• Create a diversified portfolio.
• No one can make you rich by simply providing hot tips. If I know that particular stock is going to rise, then whether I take my own position to make me rich or start distributing tips to the entire village, think?
• The dealer (terminal operator) can not make you wealthy if his income is lesser than yours.
• It is also observed such hot tops belong to penny stocks or operator driver stocks.

Although SEBI is taking strict measures to curtail this kind of activities and also issue various guidelines that who can advise their client after taking payment from them. But SEBI can not change the human tendency or psychology of the investors who generally fall into greed. 

Financial education & awareness is the only way. We have to be more alert & cautious and understand that this market is not casino gambling. Never ever fall into the trap of so-called hot tips.