Prominence & Profit

Article Excerpt

When investing aggressively, it’s particularly crucial to downplay stocks that are getting a lot of highly favourable coverage by brokers and the media. You may get the feeling that these high-profile stocks are can’t-miss investments safe to buy and forget. That’s exactly the wrong thing to do. In fact, your in-the-limelight stocks are the ones most at risk of big losses in a setback. Needless to say, lots of smart people work in the media and the brokerage business. Many broker/media favorites go up more-or-less steadily for years at a time. But because of all the favourable attention, these stocks tend to trade at a premium to their true value, compared to less prominent stocks. When they run into problems, they take a lot of people by surprise. As a result, they can fall much further than you ever thought possible. That’s why they should play only a small part in your portfolio. Note that the broker/media limelight works two ways. When brokers and the…