Stock message boards give investors the opportunity to connect with other investors of all skill levels and learn more about profitable investment strategies. While online communication methods can range from newsletters to podcasts to blogs, message boards dedicated to investing and personal finance continue to be one of the most popular ways for traders to interact and share information online.
However, it is the accuracy and reliability of the content producer that determines the legitimacy of the content itself, and this is certainly an important factor when considering participating in any message board. While the information available on these forums may be helpful to investors, we must remember to consider the sources. Not all sources are legitimate, and not all have your best interests in mind.
In this article, you'll learn how to spot and avoid scammers lurking in online forums, while still benefiting from reliable message boards worthy of your time and attention.
Key Findings
- Many investors use online stock message boards to connect with other investors, share information, and find tips for profitable trading.
- While message boards have many educational and informational benefits, investors should be cautious and avoid making investment decisions based on misleading, erroneous or fraudulent messages.
- Before investing based on anyone's analysis or ideas posted on a forum, investors should confirm information by conducting their own research and consulting with a trusted professional.
Exchange message boards 101
Many message boards focus on a specific topic or group of topics, such as investing in options, precious metals, exchange-traded funds (ETFs), or commodities. These boards allow readers to interact with people who share similar interests or have specialized knowledge in a particular area. The main function is to provide a forum where readers and users can share their thoughts.
Finance message boards are often full of hot ideas, valuable tips and information. However, when considering the source and realizing that many message boards are hosted, maintained, and receive content from individuals, ulterior motives can often come into play.
As with insider trading, erroneous message board information can have an impact on stock prices, and weeding out misleading “advice” can be difficult.
In search of precious stones
There are some general factors to consider when analyzing message board information and its source. Look for people who are blind to opposing views. These “posters” may seem to provide insight into stock performance, but in reality they are nothing more than an attempt to distort opinions for personal gain. Additionally, notice board posters with an ulterior motive may appear at a critical time.
By embellishing the facts and citing other dubious sources, these posters may attempt to distract attention from the real issues. To bolster their arguments, they may provide misleading facts, citing eye-catching statistics and inaccurately citing company metrics such as the price-to-earnings ratio (P/E ratio), return on investment (ROI), or dividend yield.
Before you invest in a stock based on someone else's analysis, be sure to confirm the numbers yourself.
You can easily check the financial performance of publicly traded companies by reviewing their quarterly and annual financial reports, which they provide to investors on their websites.
What makes a poster believable?
Obviously, proving credentials and legitimacy online can be difficult. But it can be done. Credible authors often reveal their identity and provide links to their personal websites, business sites, or personal resumes.
Additionally, legitimate writers often focus on facts or provide unbiased sources to support their comments or information. (Remember, you can try to turn tedious hours into profitable minutes if you manage your investment time correctly.)
Negative influence
It is also important to understand that on message boards there are often naysayers – people who take a position opposite to other posters. These people can become quite hostile when trying to influence the opinions of others.
For example, on message boards dedicated to investment strategies or stock trading ideas, there are sometimes people who criticize a company no matter how well it performs.
Conversely, some people tout the qualities of a particular company, no matter how dubious that company's prospects may seem.
Additionally, while bulletin boards can be an incredible resource and a great educational tool, they should not be the only tool used. If a person wants stock ideas or tax advice, it probably makes sense to discuss those ideas with a professional before acting on them.
Bottom line
The Internet is full of message boards dedicated to general discussions as well as threads dedicated to specific topics. Both have the potential to enlighten or entertain readers and posters. However, members of such sites should be aware that even the most trustworthy sources may contain erroneous information.
Carefully sifting through legitimate opinions and analyzing investing and trading sites can be a task in itself, but that's exactly the challenge when you're trying to get the most out of stock message boards.
