Homework, not tips, give best results

RELYING on investment tips printed in the media is like trying to learn a foreign language using a tourist phrase book.

So says Australian Securities and Investments Commissions Office of Consumer Protection director Peter Kell.

“If you are going to buy shares you need to do your own homework,” Mr Kell said.

“Media advice is usually aimed at a wide audience. It may give general guidance but it cannot cater for your individual financial circumstances.

“Buy shares only if they fit into an investment plan that suits your specific needs and circumstances.

“Choose shares because you understand the company behind them and because you believe that company is worth investing in.”

Mr Kell said as a general rule, shares were best utilised in a structured investment plan – not as a short-term ‘quick-win’ solution motivated only by media tips.

“For example, if you are thinking about buying a house in the next few months, it would not make much sense to put your deposit into the sharemarket,” he said.

“In this case it would be more sensible to put your deposit money somewhere more stable, even if the returns look lower.

“In the short-term shares can rise and fall quite dramatically.

“If you need help drawing up a financial plan, as many people do, always use a licensed investment advisor.”

Corporations law states that media commentators and advisors must clearly warn people that tips and general advice are nothing more than that.

Tips and general advice may help investors understand some basic facts about shares and companies but they will not suit the needs of every individual.

Share tips and general advice in the media have grown substantially as share ownership has increased to now include 40 per cent of all Australians.

Recent privatisations such as the first Telstra float have led to share ownership including 40 per cent of all Australians.

Mr Kell said investors also needed to take great care with tips on particular companies.

“Some companies’ shares are best held for many years while others work best if bought and sold fairly quickly,” he said.

“Even experts cannot reliably predict if particular share prices will go up or down in the short-term and their long-term predictions can also go astray.

“Given that experienced investors will say they are doing well if just half their choices show a good return, it is important for all investors to be fully informed when making investment decisions,” he said.

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