Why Do Non-Professional People Freely Give Stock Tips?

There is this young guy in my office; he is nice enough but one of those huge talkers.  I have a feeling when I read this post back in a couple years it’ll be hard for me to remember his name because I don’t believe he’ll be here in a couple of years.  Notwithstanding, he comes in every few weeks and spouts off a new stock “tip” and his reasoning.  Some score big some do not, but I always wonder – why do it?

In conversations of the one I am speaking of I rarely hear the words of free cash flow, balance sheet, current or forward P/E, etc.  They usually involve buzz words like “I know a guy who knows a guy”, earnings are going to be up because I just know it, etc.

On the one hand you may make someone a lot of money, and you can be that big shot you seem to crave to be…the one who has a crystal ball into the market…the one we can call Midas.

On the other hand you may not make someone a lot of money, and in fact, you could lose someone a ton of cash just as easy as you can make it since the “tip” is likely to be nothing more than just a tip you got from someone else.

Are you one of these guys? If so, why do you share your knowledge?  I refuse to believe it is due to some altruistic drive deep within.  A desire to make sure those around you benefit from your vast knowledge. No chance.

6 Responses to Why Do Non-Professional People Freely Give Stock Tips?

  1. Ha this is something that I constantly wonder. I don’t even feel comfortable giving investment advice, and I’m an investment banker! It kills me when people with no finance related degrees or history try to tell people what is right and what is wrong.

  2. I only give investment advice on my blog and when asked. I never recommend single stocks. I might look over a person’s portfolio, and make suggestions on how to simplify it, when asked. Generally, I will point to the low-cost passive index funds that make up the 3-fund portfolio of Total US Stock Market, Total International Stock Market (ex-US), and Total Bond Market. And then spend time asking about the person’s willingness to take risk.

  3. I think some do it just to show off. And I hate those who do that, why don’t they just keep it to themselves, right?

  4. “Why Do Non-Professional People Freely Give Stock Tips?”

    Heh…for the same reason the armchair politicians advise on the wisest course for our country: to hear his voice rattle.

    Unless you’re sitting around over wine with other members of your investment club, it’s hard to imagine why you would volunteer advice on stocks. It’s like advising on which horse to bet on.

    I have been known to suggest to people who asked that they consider a low-load mutual fund like Vanguard or Fidelity. But “Plastics, young man”? Not likely.

  5. You should start an Excel sheet on this guy noting the tip and the tip date to compile some data on his return vs. the market. Could be a fun and illustrative exercise.

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