Monday, September 13, 2010

A little Web advice can be a dangerous thing

I was reading this column of the same title by Jonathan Chevreau of the Financial Post on the weekend and I would like to make some comments.

We all know we cannot count on people being smart all the time. That is rather dangerous. On the other hand, you cannot assume that Joe Q or Jane Q public is dumb. This is just as dangerous. People very often forget this, and it is especially common in politicians, but it can be found in lots of other places as well. I do not know about you, but I read blogs etc to get ideas and learn about other people approaches to such subjects as investing. I rather think this is common.

I must admit that I do not often talk about fixed income as I have very little of this at the moment, interest rates being so low being a main reason. However, the same rules apply to fixed income as to other investment. Do not invest in what you do not understand. Also, you want to make sure you understand how any entity you investment is going to pay out what you expect. This applies to a bond as well as any stock.

Maybe bloggers that talk about stocks do not talk about fixed income because that is a whole other world that is probably more complex than stock investing. I have had some experience in bonds, GICs, etc, and just because something is labeled fixed income, you cannot assume that it is a safe investment. Do not let anyone fool you into thinking this, because it is wrong. You still need to know what you are doing, or you should get help.

As far as investing in dividend funds, I would not do so, as I do not invest in Mutual Funds or ETFs that contain stocks. However, I do invest in dividend stocks. Are they for everyone? Of course, not. As I have pointed out, do not invest in what you do not understand. Do not invest in anything that prevents you from getting a good night sleep.

I have not come across any blogger that says to “avoid foreign markets because of currency risk/currency conversion fees”. However, I think that it is worth pointing out that if you invest in a Canadian company that has overseas business, you do have a currency risk. It is just the company you invest in that helps you to manage this risk. I do seek out Canadian International companies to invest in because of this and I have dabbled a bit in foreign stock. Never made much in foreign stock, but it was a learning experience.

And if you happen to come across a blog that says, “Follow my lead because I made 30% returns every year in the last seven years", remember what your mother said. If something sounds too good to be true, it probably is. My mother was not very sophisticated, but she certainly knew a tall tale when she saw one. But, really, however, many people are going to believe such a claim and for how? And, this gets back to my first point. Do not underestimate the general public.

Personally, I have learned as much from other bloggers as I have from newspaper columnist, books, and other so called experts. I think the main thing to keep in mind is to use your common sense. I do not know of any dividendman etc blogger, but I do know a blogger called “Dividend Girl”. I have referred to her site previously at Dividend Girl. She basically talks about what she is personally doing. She may not say her name, but I can understand that. In this day and age, as a woman, you still must be careful. If I give the sort of information out on what I am doing as she is, I would not put my name to the blog either.

You never know from whom you might learn something useful. So, do not let anyone put you off reading your favorite blogger, whoever that should be.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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