Share tips can be great, when they are accurate, but they can also be costly when they are wrong. Successful investors do their own research, fact-checking the tip and doing a thorough analysis of the company in question before leaping in and buying shares. Whether your share tips take you on the hunt for the best UK shares or venturing further afield, if you maintain a strategy to your investing you will be much more likely to get rich and reach for millionaire status.
Use share tips as a stepping stone
We have all overheard, read or been regaled with exciting stories of life-changing sums of money being accumulated on the stock market. These are not fictional. Many people really have become rich and made millions through savvy investing. Some of them even use share tips to help them on their way, but they do not simply take them at face value. We should view the share tips as a stepping stone.
The key to using share tips to your advantage is to use the tip as a basis for your research. If a friend says to “check out the Lloyds share price, it’s cheap as chips just now,” then do that. But go further than just glancing over the chart, take an intense look into the company and its financial status. Look at its price-to-earnings ratio, its debt level and whether it offers dividends. Read through its most recent reports and shareholder letter. You can get a good feel for the way a company is run from the way the board talks to its shareholders.
Follow Warren Buffett’s lead
Warren Buffett is famous not only for being an incredibly successful investor, but also for his personal letters to shareholders. They are heartfelt, informative and educational. Even if you have no intention of buying shares in Buffett’s company, Berkshire Hathaway, it is still worth reading some of his shareholder letters to learn a thing or two and glean some tips on investing.
Accepting share tips at face value is an easy and exhilarating option, but it is no different to gambling. There is no point in blaming the tipster when your investment goes wrong, if you have not taken the time to thoroughly do your homework before investing.
Too good to be true?
We all want to buy low, sell high, but this is not always as easy as it sounds. Often, if a share tip sounds too good to be true, it is. By the time the news has filtered through to you, the stock value may have already been realised, leaving little room for further growth.
A value investing strategy such that favoured by Buffett does not focus on timing the market, but on finding a valuable stock that can grow over a long period. I think this is the best approach to investing and the most likely one to build a sustainable level of wealth and prosperity. I do not think you should completely ignore share tips. They can provide a fantastic way to find hidden gems that become highly lucrative investments. But remain cautious, never invest more than you can afford to lose and always do your homework before buying UK shares or stocks in any market.
The post How I think you can use share tips to get rich and reach for millionaire status appeared first on The Motley Fool UK.
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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short September 2020 $200 calls on Berkshire Hathaway (B shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020