The Stock Market has only two directions up or down, even Tom, Dick, and Harry can make money and the success ratio is 50%. Let me be very practical while you are with me throughout this article. For an investor or trader, the internet is the best place for research and of course, you already have a Demat account or browsing for the cheapest broker. The one who has an online presence and advertise aggressively get more customers irrespective of the quality of the services they provide. During this process, knowingly or unknowingly, you would have shared your contact details with at least 2-3 websites or even more than that. It’s really hard to find who shares your data with stock advisory services, but definitely your data is being misused.
Using the available database, the company employee starts telecalling. Mostly these companies are based out of Indore (earlier they used to call from Ahmedabad, Ghaziabad, Noida and many other cities). Here goes the actual conversation; an employee of advisory company calls you and asks: Sir/Madam mein so and so research and advisory company se baath kar raha hoon, aap share market mein trading karthe ho kya? (I am calling from so and so research and advisory company, Do you trade in stock market)
Advisory: Aap khud se trade karte ho ya kisi ka madad se karte ho (Do you trade on your own or take help of anyone)
You: Sometimes I research online, otherwise i trade on my own
Advisory: We will give you a free trial call, just do one trade, if you like our services, then subscribe to our premium services. We have a team of experts in technical analysis and fundamental analysis, they generate sure shot calls. Besides, we have a lot of insider information and a strong network with FII’s and DII’s.
You: Ok, agreed.
Now, let us do some maths. Like you the advisory company might have been speaking to 10,000 other investors. Out of these 10,000 investors, they give a buy call for Reliance Industries at 2300 for 5,000 investors and a sell call for Reliance Industries at 2,300 for the other 5,000 investors. For sure, the call is a definite hit for 5,000 investors and a failed call for the other 5,000. Now, 5,000 investors will subscribe for their premium service, and one final day they also end up losing money. When you are at loss, either they never respond to your calls or advise you to subscribe to ultra-premium services. It doesn’t stop here, your contact details keep sharing with other companies only because you have already responded and acted to these research calls.
Instead, just ignore these calls and never entertain such advisory firms. It’s always better to keep in mind, the two most important keywords in investment, the first is “Diversification” and the second is “Risk Management”.
Diversify your investments across different asset classes like Equity, Gold, Real Estate, Fixed Deposits, Mutual Funds, and Bonds. In equity, diversify your portfolio across different sectors. There is a famous quote by the no. 1 legend in the Stock Market Warren Buffet, where he says “Don’t put all your eggs in one basket”.
Risk Management is as crucial as diversification. Keep in mind, that in case of distress, try to exit from any asset class with a minimum loss, more specifically in equity markets.