Remember the good old days of investing? Days when you would call your stockbroker, ask his advice and then invest accordingly? Those days are long gone thanks to the Internet and self-directed investing apps. Today a good many investors rely more on free stock picks than sound advice from investment professionals.
Do not misunderstand; free stock picks have their place - just like advice from paid professionals. However, any investor able to think for himself uses every investment resource with proper caution. No single source of advice or information is foolproof, nor should it be trusted without question. That includes free stock picks.
Why They're Good
The good thing about free picks, and particularly U.S. stock picks, is the fact that there are so many experienced people out there doing the legwork for you. That means the investors writing the daily stock articles will be right from time to time. They also have some market insight that the casual investor lacks, providing them a better glimpse into the future of a given stock.
Free picks are useful inasmuch as they give you more information to work with. A good strategy is to take picks from several different analysts and compare them against one another. If all of them generally agree on a specific stock, that's something to seriously consider when making investment decisions. If they are all over the board regarding another, it tells you to stay away.
Why They're Not Good
The problem with free stock picks it that the analysts offering them have no real incentive to make sure they are as accurate as possible. They can advise according to any criteria they set for the day; criteria that can include, among other things, whether or not their favorite team won the game last night. Casual investors rarely track the records of those offering U.S. stock picks for free, so they do not really know how well an analyst performs over the long haul.
That said, the number one rule of investing in stocks is to pay attention to long-term performance. Making good money off the stock market is a pursuit that is generally not achieved overnight. So when investors don't know the historic performance of a stock analyst, they also don't know if the analyst picks are worth anything.
What It Means to You
Self-directed investing is a great opportunity to take advantage of what the stock market has to offer. By all means, take into consideration the U.S. stock picks offered by analysts for free. Nevertheless, do your own homework on any stock you think you are interested in purchasing.
At the end of the day, self-directed investing comes down to the casual investor learning and understanding for himself. Free stock picks are just one tool in that process. As long as they are viewed with the proper perspective, such picks can be helpful. But if an investor bases his entire strategy on what analysts are putting out for free, he is just asking to lose his shirt.
Written by Samory Borry
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