Although most people are aware of the maxim “If it sounds too good to be true, it usually is,” such awareness stops few of us from chasing the excitement that apparent inside knowledge provides. Yet, when it comes to stock market investing, market timing (trying to figure out the right time to buy and sell an investment) is a proven long-term loser. (See Three reasons not to follow Jim Cramer.)
Fortunately, there are numerous publications that have concluded and promote a more appropriate (albeit less exciting) “buy and hold” investment philosophy. Such thinking states that, over the long-term, simply investing in high-quality low-expense mutual funds and just sitting on them will likely return the best overall investment performance.
What I continue to find amazing is that even those publications who preach the tried and true approach still seem to have another side business: promoting hot tips. Take, for example, the magazine Fortune. For pure business journalism, there isn’t much better writing and I subscribe. Sometimes, however, my eyes do wonder into their “Investing” section. It is here that my personal viewpoints greatly diverge. But again, I often still read it, just to see what’s going on in the minds of some of today’s leading thinkers.
Back in December, one of the stocks Fortune recommended for 2008 was an energy company called Petrobras Energia, a Brazilian oil company. They made a fairly convincing case for why one should consider investing in that stock at that time (assuming, of course, you believed that you could outperform the market simply by following the instructions of a high quality magazine). Of course there’s no way to know, but I imagine a healthy number of people researched and subsequently bought the stock. I’d also guess (but have no way to confirm) that many other Fortune readers simply bought the stock and considered that their reading of the Fortune article constituted sufficient research.
Now here’s the rub. I’m not saying that Petrobras Energia isn’t a great company or a great stock to buy (noting that those two descriptions don’t mean the same thing). Rather, I’m going to highlight something I saw in a recent issue of Fortune (one with a print date 6 weeks after the initial stock recommendation):
“In ‘The Best Stocks for 2008′ (Dec. 24, 2007) we gave the wrong name, ticker symbol, and price for the Brazilian oil company we recommended. The correct name and ticker is Petroleo Brasileiro (PBR). The name, ticker, and price we provided were that of Petroleo Brasileiro’s Argentine affiliate, Petrobras Energia. We regret the error.”
I’ll say! They got the company name, ticker, and price wrong. So how could you have known that they were talking about an entirely different entity for the duration of the recommendation? Doubtful you could have. Would Fortune still recommend the stock today? They don’t say What about if you purchased Petrobras Energia – was that a good idea? No comment there issue.
I applaud Fortune for at least printing a correction, one I’m not so sure they even had to do. Still, if this doesn’t give you pause before acting a hot stock tip from someone far less reputable than Fortune magazine, I’m not sure anything ever will.
What about you? Ever been burned (or nearly burned) by someone else’s recommendation? Not the best way to live Beyond Paycheck to Paycheck, is it?
“personal finance” 
“financial education”
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