Friday, March 02, 2007

You can go broke within a year if you listen to tips

With enough information and one million dollars you can go broke within a year, says Warren Buffett.

The other day, not so long ago, I was unloading a particular stock, when my remiser called. He said, “Uncle, I heard that XXX (the stock I was selling) will be played up in the next few days.” I said, “Never mind, I shall complete my sale.” It was very easy to sell then because the demand for the stock was great and turnover was exceptionally high.

The following day, the stock dropped 30% lower. Later, I found out that one of the directors of the company had on that particular day sold some 10 million shares. There you are; if I had listened to the tip, I would be trapped.

Beginners’ first touch with the market is usually lovely. They begin to think that those who work for a living are silly. Later on, they find that the market is not that lovely; they begin to hate it; fear it and then to respect it. For those who eventually love it again, they are the ones who have succeeded.

If you are about to speculate in stocks and shares, it behooves you to ask yourself if you have the fast-reasoning power, knowledge and wisdom to compete with the ablest brains in the world who are working full time. If you don’t, better be an investor.