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A story we read about stock market TIPs in a book by an internationally acclaimed author goes something like this.
One day, somebody (let’s call him Mr. X) received a stock market prediction in a newsletter from a TIPster, saying that they give accurate Stock Market TIPs and which can be tested for a few days before subscribing to their service. The service was unusually expensive and the newsletter also mentioned that these charges were high, since they were able to predict the markets with 100% accuracy. It further said that Mr. X can try it for a few days and then decide. Fair deal, Mr. X thought. The note also had the stock market prediction for that day, which said that Share A will be down for that day.
Mr. X made a mental note without giving too much attention to it and went on with his daily routine. By evening he had even forgotten about it.
Next morning again the Prediction newsletter came and said that Share B will go up that day. This reminded Mr. X about Share A and on looking up in the newspaper, he saw that Share A was indeed down the previous day. But he was not particularly enthused as he thought that getting one prediction right is no big deal. But this time, he made efforts to remember the Prediction about Stock B. Today he was actively tracking what happened to the stock B and when markets actually closed. He realized that Stock B has actually gone up as predicted by Mr. X. He got a bit excited but thought of seeing what happens the other day.
Next morning he received the prediction newsletter again which claimed Stock C will go up today. Mr. X kept the note in his pocket and was mentally calculating how much he should invest. But he was hesitant and didn’t invest. During the day, he was excitedly looking at the Business Channel to see where Stock C was heading. And when the markets closed Voila, the prediction again was true.
Mr. X now was quite excited as he thought he has found a great opportunity to invest in stock markets and make some money with this 100% accurate newsletter.
Next day he was waiting for the Prediction which did come but along with the prediction for Stock D it also said that if you want to continue this service you have to pay the fees. The fees were hefty , but Mr. X thought even if few predictions are right he can make a lot of money which will more than cover the fees.
That day he invested a small amount of money in the recommended Stock and it again went up. Mr. X took out his cheque book and started writing a cheque. While he was doing so his wife came to him and asked him to exercise caution while paying the hefty fees. Mr. X was not in the mood to listen to anyone and continued writing the cheque. He than went out mail it to the TIPSter.
As soon he got out of his house he met his neighbor, let’s call him Mr. Z. They got talking and Mr. X told him about this new stock market prediction service. In fact, he even showed it to Mr. Z. Mr. Z looked at with a puzzled expression.
He said he also got this letter for two days – first day’s prediction was right but on the second day it was wrong. Then he didn’t receive any further predictions after the wrong prediction. This revelation by Mr. Z got Mr. X thinking. He asked him whether recollects what were the recommendations. Fortunately, Mr. Z had those newsletters and immediately bought them to Mr. X.
Mr. X and Mr. Z now placed them in front of them and the entire gameplan got clear in their head.
So what was happening!
This TIPster started by sending two opposite predictions to a large number of people who they picked from a Telephone Directory. Now he was maintaining the record of what recommendation were sent out to whom. In the evening, they will know that for 50% people recommendation was right.
The next day predictions were sent only to those 5000 thousand investors. Out of these 5000 again to 2500 one prediction was given whereas to other 2500 opposite of it was given. By evening for 1250 people the TIPster would have been proven right thrice.
The Same step being repeated next day and now for 625 people the TIPster has been proven right 4 times in a row. Quite an impressive track record for the unsuspecting investor. By this time a lot of investors started taking them seriously and were willing to pay the hefty fees. Even if a fraction of people pays the hefty fees it’s a money spinner for the TIPster. But for the Investor it’s a PIT. Avoid falling for and in it 
We have recreated this story from a popular book and are thankful to that author for letting us realize this. There are a lot other issues with the TIPs received for stock market investing, which will cover in other articles.
Illustration of Modus Operandi

stock tips are a pit


So on so forth.
Next time when you get the TIP, take a hard look and real hard look. Think about
Source of that tip,
The incentive of the person giving you the tip
The responsibility of the person giving you the tip
Track Record and reputation of the person giving you the tip
Why is he giving you the tip
And listen to your wife :)
Thanks for reading and if you have any experiences to share, please do.