Lot of people rely on buy/sell advice provided by numerous analysis and Broking houses, while they have varied performance, its usefulness mostly depends on the individual himself who is looking out for such service, are they lucky to find a real guy, trust him and integrate well with his trading style. Markets have the good, the bad and the ugly all three types, finding a bad will be automatically simple, contrast to a good analysts who is hidden underneath piles of ugliest.
Legal analysts – the bad
For our discussion 2 types of analyst exists in the market, first one is a registered financial advisor and second is our young Harry who operates through social media, likes of FB, Telegram and WhatsApp. Registered analysts have legal permissions from regulatory institutions to allow them share views to the public. The other individual Harry operates “illegally“.
Now I don’t want to stereotype all cases but ironically – tips from registered analysts tend to be often wrong, unfortunately their selling point is not by accuracy of buy or sell advice they generate, instead their business model is complex and different. Compared to individual Harry, they are much better equipped with links and money. They are able to pay hefty fees to stock regulatory bodies to maintain these licenses. It is not exaggerated to say that, they are paid for giving advice that fail.
The good and ugly guy
The other guy Harry may have worst or best skills, but if they consistently give advice ending up in losses, they will be out of market soon, on the other side a registered analyst has access to TV media etc, and mostly importantly support from their big bosses sitting offshore, they can keep giving miserable tips and still survive. Another way to look at this would be anyone with high skills would have no reasons to indulge in such activities. They will either trade with their own money or operate in a small group of high paying clients.
So the conclusion is always check the success rate of any stock market analysts for long enough, before investing any real money with their advice. Don’t just jump on because they are registered or heard his name. Specially be careful of those analysts who are very famous or have a lot of fan followings.
Ideally a regulatory body must ask to log each tip from these registered advisors, and cancel their license if the success rate falls below 50% for that particular analyst.