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Moneycontrol.com >> Message Board >> View Messages >> Other Market Topics
   You are here :     Moneycontrol     MMB    Market View      Other Market Topics                         Most active discussions of 2006 , 2007 & 2008
How to Select a Stock Advisory (1)   23-Jul-08 10:55Tracked by (0)  
Posted by:   latikav on ( 23-Jul-08 10:55 )
Fight the Bear---------------------Bear markets separate the men from the boys. Even the most amateur of investors have made money in the bull run. However, with the advent of 2008, most of the gains have vanished in the bylanes of Dalal Street. It is perhaps time for expert advice.

But while there may be many who promise to make you a millionaire for a fee, it is imperative that you think on some factors before you sign up one of them.
Trader or investor ----------Define the type of market participant you are. The needs of a long-term investor, a positional delivery-based trader and a day trader vastly differ from each other. If you are a player in the cash market only, then go for a cash market newsletter.

No point buying a bouquet offering — from cash market calls to derivatives — just because it is ‘cheaper’ when compared to sum of parts. Instead, use the same money to invest.

Institutional or professional ----------Unfortunately, there is no comprehensive database of advisors available since they are neither registered by the regulator nor are they organised into an association. The only way to find one is by word of mouth in case of individual advisors or through the internet for larger service providers.

Experts say an institutional setup is better than individual advisors. Institutional set ups ensure stability and consistency in research and recommendations, which may lack with individuals. Also, getting a track record of the institutional advisory is easier.

Measuring success -------The success of an advisor is reflected by the success of his recommendations. A good advisor would get seven out of 10 recommendations right. But someone who claims a 100 per cent success in recommendations is probably lying or has been extremely lucky.

With the rising use of internet networking portals, message boards and virtual groups, the information about track record and service standard is available

Costs---------The costs of expert advice varies from Rs 500 to Rs 25,000 per month, depending upon the services the advisor is offering. The wide range makes it imperative for the buyer to probe into the gamut of services and the performance into greater detail. A fee of Rs 10,000 for one year can halve the 20% profits that is Rs 20,000 earned on an investment of Rs 1,00,000.

Also note that the fees are paid in advance and the performance is not guaranteed. One must note that there are some advisors who offer discounts if you subscribe for a longer term. However, experts reckon that one should first go for a short-term subscription. This ensures that the losses incurred due to subscription of a ‘non-performing’ service remain minimal. While paying for an advisory service, please do pay by cheque. Never deposit cash in the bank account of the advisor, though some individuals encourage it.
Delivery ----------Some advisors offer their calls on mobile in the form of an SMS. However, some made it a point that you have to access your mail daily after 9:30 in the morning. Some offer ‘live’ calls on yahoo messenger. Each of these delivery methods has its own positives and negatives. Access to mobiles, internet may be a deciding factor. Also, it may escalate the costs of such ‘informed trading’.

The newsletter format and the jargon must be known to you in advance. No guesswork should be employed as it may cost you dear money. This becomes more important if you are a trader. Those who intend to go for derivatives trading must have an understanding of complex strategies.

Redressal-----------The advisory must have a grievance redressal mechanism. There are instances where despite paying the fees in advance, the ‘login’ is not created in time or the ‘login’ fails.

Such issues can deprive you of moneymaking opportunities.

Source----------- ET

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