Interesting article

There is s very good article in the latest issue of Outlook business, titled "Broker Advice". I could not find the article on the web and so am not able to post a link. However I summarize it here :

The author Dhruv Rathi asks you not to invest on the basis of your broker's advice or on the basis of recommendations in the media. He lists numerous cases in the last year where scrips recommended by various brokerage houses and equity research analysts , have lost heavily ( as high as 50 % in some cases ) . The reason which he gives for this is something that I have long suspected . According to insiders at one of the leading brokerages, stock ideas are first used to build proprietary positions, then recommended to big clients - institutions and mutual funds- followed by private banking clients, friends and associates and finally to the media and newswires. Thus the common investor usually gets to see the broker advice/report well after the big moves have taken place and mostly just before the offloading starts. Little wonder then that they make little or no money on brokerage recommendations, as these come into the public domain only after the key clients have made their purchases. Doesn't this sound similar to what I said while recommending "paradyne infotech", in my last post.

So, the moral of the story is that these recommendations should be taken more as food for thought, rather than for making investment decisions without doing your homework.