Helpful Stock Information

Only licensed brokers and other financial advisers are legally allowed to give stock advice

There are three main sources that provide stock information: brokerage firms, independent financial websites and online forums. Only licensed brokers and other financial advisers are legally allowed to give stock advice. However, many individuals break this law through providing financial advice online.

History

Until 1999, information about stocks was typically provided through a newspaper or brokerage firm. However, in 1999 electronic communication networks (ECNs) became widely used. This helped catalyze the wide pread use of online brokers. From this thousands of financial websites and forums formed to provide advice to new investors. Despite all the available information, many investors still relied on brokerage firms for stock information.

Function

Stock information provided by any resource is intended to help inform an investor of how to trade a security. Although most stock information is in favor of the security being reviewed, some information is intended to reveal the underlying secrets of the company. For the most part, most information is intended to persuade potential investors to buy or short sell a security. Short selling is done through borrowing shares of a particular company from a brokerage firm then selling the shares, and later buying back the shares to reimburse the broker. However, not all stock information is biased. Many brokerage firms and independent websites such as Yahoo Finance want to provide a potential investor with a comprehensive view of a company.

Considerations

Stock information provided by other investors through an online message board is less reliable than information provided by an independent financial website or brokerage firms. Most message boards do not monitor user registration. Thus, message boards, for the most part, are completely anonymous. The information discussed on message boards is typically not monitored as well.

Brokerage firms are the most reliable source of stock information. Brokers are licensed by the federal government and can lose their license for providing misleading or false financial information. The Securities and Exchange Commission (SEC) inspects all reports of brokers providing misleading or false information. Well-known financial websites such as the Motley Fool are also, for the most part, correct and informative. However, writers of these websites are not bound to the same ethical and legal restrictions that brokers are.

Benefits

Stock information provided on a message board may be very insightful. Although most users are new investors, some experienced investors do occasionally post on message boards. In addition, the information on the message boards and on financial websites, whether true or not, reveals the optimism or pessimism of the investors, which may aid in predicting the direction of a security. For example, even if a particular company has terrible earnings, if dozens of financial websites and hundreds of message board users are optimistic about the upcoming earnings report, the stock may increase when the earnings date is near.

Warning

Always research the stock information you receive whether the information is provided by a broker, well-known financial website or by an anonymous poster on a message board. In addition, thoroughly research a company before investing. Even if a company has a particularly good quarter, if the company is near bankruptcy, the stock price may continue to decrease.

References

• Motley Fool
• Yahoo Finance
• Amazines: Penny Stock Message Boards and Stock Chat Rooms