Making Millions in the Stock Market ?

[Robert Avila]

A friend of mine is planning to make his millions on IPO's.

One of his strategies is to follow the "picks" of current billionaires.....to see where their money is going.

What's missing here?

Can one be successful by researching companies - newsletters, blogs, subscriptions to reports....and following the "picks" of current billionaires?

As in any business, there are always unknowns...

What potential pitfalls could lurk below the surface of this investment strategy?

I feel as though there are some pieces missing from this "puzzle" ....factors that have not been taken into consideration?

Wish you the best....Thanks!

Robert Avila

[cdn2wheeler]

Originally Posted by Robert Avila

Can one be successful by researching companies - newsletters, blogs, subscriptions to reports....and following the "picks" of current billionaires?

That's one way of going about it, but it's certainly not foolproof. These billionaires have room to make mistakes; they can go short and if things go south they won't lose their house. Most regular grunts like you & I don't have that luxury.

From 24/7 Wall Street, March 2007:

In the last 3-years if you buy what he [Warren Buffett] has bought on the announcement date (13D filings) you would have actually lost money.

Remember that much of the value of stock prices often have less to do with financial fundamentals than they do with herd mentality, greed and fear.

[Robert Avila]

cdn2wheeler,

Thank you for the fast response, I appreciate it.

I will definitely pass the link on to my friend.

You have me cracking up over here!!!!

This is the best:

if things go south they won't lose their house. Most regular grunts like you & I don't have that luxury.

That sums it up right there!!!!

Have an Awesome Weekend,

Robert Avila

[AdamF24]

If all your friend plans on doing is following others (it doesn't matter that the "others" are billionaires) to lead him to stock market success, he's going to fail very miserably. The stock market is incredibly complex, and attempting any get rich quick scheme in it will never work.

My advice to your friend: learn how to invest in the stock market on your ability to research stocks, the overall economy, how psychology comes into play, and follow the stock market on a daily basis. Only then will you be able to be successful in the stock market for the long term.

[Lauxa]

Any information that your friend has access to, others have access to as well. The stock market knows as soon as Warren Buffet buys something, and the price of the stock rises accordingly. Your friend would have to somehow know what millionaires were going to buy before they bought it.

Also, billionaires have access to deals regular grunts do not. They can purchase unsecured investments, invest in private funds, or buy out companies. They have enough weight to actually manipulate prices to their advantage on certain commodities. I would bet they make more money with these methods than with their general stock picks.

[AdamF24]

Originally Posted by Lauxa

Your friend would have to somehow know what millionaires were going to buy before they bought it.

I wonder if that would qualify as insider information? My guess would be yes.

[Ninja]

Stocks often go up BECAUSE milionairs buy them.

Milionair buys stocks > price goes up > 'clever' investors follow in his footsteps and buy the stock > stock price goes up even more > milionair sells stocks > stock price plummets > 'clever' investors bite the dust

Something like this happened during the Internet boom. People were going crazy for everything dot-com and as a result, the stock prices soared. The professionals sold their stock at the peak, the average joe got greedy and waited until the professionals flooded the market by selling their shares (because they knew most internet companies would never make a profit), causing everyone else to get suspicious, sell their shares as well, and made the bubble pop.

Someone once said it's easy to make money on stocks: you just need to buy from pessimists and sell to optimists. I'm definitely going to try it, as soon as I have saved up some money.

[DarkSociologist]

Hi Robert,

First, you shouldn't compare your friend's strategy to a person who follows Warren Buffet, because your friend is going to buy IPOs, while Warren Buffet only purchases established companies, with high cash flows and growth potential, which just happen to be at a low price at the moment.

Something your friend should consider, though, is that very rich people often have access to stock options before the IPO, at a significantly reduced price. For example, Billionaire A may be offered 100,000 shares at $20 each, while when the stock goes public, it may be sold at $30 each when your friend can buy it on the market. This puts him at an immediate disadvantage.

Also, during the initial purchasing phase, companies may provide a contract for a guaranteed return. I know that when the company that I was working at offered stocks to investors, they were guaranteed, in contract, something like a price 20% above their investment after 6 months.

So if you can't get the inside investment, then it is much more risky to invest in an IPO. Then again, a few of my friends purchased VMW when it came out and they've made quite a lot.

[Robert Avila]

Thanks again....

I appreciate everyone's time and detailed responses.

My friends passion for "hitting a home run" is pretty intense.

I hope that all of his dreams come true....and though I will never be a "dream stealer"....the more information he has to make decisions the better.

Enjoy your Thanksgiving Eve....and have a Happy Thanksgiving!

Robert Avila