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I've been into stocks for a few months now, and all I'm basing my decisions are stock recommendations and price history.

Is it too risky or "happy-go-lucky" to do what I'm doing now?

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    I think you probably already know the answer to this question. Doing anything without research is the definition of "unwise".
    – user22731
    Feb 7, 2015 at 18:24
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    Do you know that most stock recommendations are biased? Most analysts were still recommending a strong buy for Enron whilst it was half way down to zero.
    – Victor
    Feb 7, 2015 at 21:20
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    Do not do any individual stock investing with money you can't afford to lose. Consider that kind of investing with leftover "play money", because especially with no research, you will likely lose a lot of it.
    – Adam Johns
    Feb 12, 2015 at 16:14

3 Answers 3

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If you don't want to do the deep research on each individual company, you might want to look at index funds and similar "whole market" investments.

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Stock recommendations and price history are an unwise way to invest.

People that recommend stocks are usually compensation for recommending it. They are paid directly by third parties, that can be paid in shares, they can simply own the stock themselves and if the stock goes up they can sell it to new investors at a higher price (or even a lower price, they may not actually care)

Price history does not tell you a complete picture, what kind of price history are you even looking at: "this stock went up, let me buy now at the very top and hope it goes higher, am I too late" "this stock went down let me avoid it"

if you don't know why, what, who, when, assets, debt, etc, you shouldn't be buying the stock.

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I don't see balance sheet in what you're looking at, and I'd definitely suggest learning how to read a balance sheet and looking at it, if you're going to buy stock in a company, unless you know that the recommendations you're buying on are already doing that and you're willing to take that risk. Also, reading past balance sheets and statements can give you an idea about how accurate the company is with their predictions, or if they have a history of financial integrity.

Now, if you're going the model portfolio route, which has become popular, the assumption that many of these stock buyers are making is that someone else is doing that for them. I am not saying that this assumption is valid, just one that I've seen; you will definitely find a lot of skeptics, and rightly so, about model portfolios. Likewise, people who trade based on what [Person X] does (like Warren Buffett or David Einhorn) are assuming that they're doing the research. The downside to this is if you follow someone like this. Yeah, oops.

I should also point out that technical analysis, especially high probability TA, generally only looks at history. Most would define it as high risk and there are many underlying assumptions with reading the price movements by high probability TA types.

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