Think about this: A friend has a tip from another friend who works for a company that is about to report a very strong earnings report. He urges you to jump on the stock in order to make a pile of money on a “sure thing.” The recommendation sounds tempting. You toss and turn all night as you think about how much money you can make if your friend is right. In the morning you decide instead of just buying the stock, you’ll buy 100 call options and make 10 times the amount of money you would with a stock. Obviously this decision has a few problems. For one, it constitutes insider trading, which is illegal. Secondly, it violates any rules of protecting your downside by not doing your own research first and determining if this is a company worth owning. Maybe most importantly, what does your friend know about investing? Is he qualified to be giving you expert financial investing advice? Why are you trusting your money on a tip? Avoid listening to the wrong people who are not qualified to be giving you advice, do your own due diligence, and stick to your rules. If professional investors cannot accurately predict the direction of the market, chances are your friend is not capable of giving you advice. Similarly, just because an analyst suggests that a stock is overvalued during a television interview, this is not a good enough reason to run out and sell the stock.