Advising Ourselves (Part 4)

When do stock tips work?

Investment advice works best when people treat their investments like a business. If you are investing, you’re really acquiring future sources of cash. Some—like most bonds—come with contractual payments and a final date. Others—like tech stocks—come with a vague promise to begin returning cash to shareholders when the business matures. All of them, even government bonds, depend on the economy.

If you were running a business, you wouldn’t tune in to a general business show for specific advice. There might be some general principles, like human resource management or accounting, that are universal enough where general advice could help. But if you want advice tailored to help you, you want someone that will take the time to understand your specific situation.

Be aware of the biases of those who would advise you—their incentives, background, temperament, and experience. Advice is a dangerous gift, and there may be no good options. Someone who freely offers his opinion about fire may not have been burned yet. Be careful.

Above all, don’t be afraid to ask hard questions. Good opinions take a long time to form. They should be grounded in economic and financial reality, and, once implemented, be fairly boring. Good investing is like good gardening—it takes time to bear fruit. But it’s worth the wait.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2014-04-08T09:04:38+00:00 April 8th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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