Friends and family

Friends and family may make for a solid telephone plan, but investing advice? Not so much, at least in my experience.

Provenge, wildcat oil, cancer research startups ... all these investments turned out to be big losers for me, and I made them based on advice from friends and family. I am not too smart, so it took some real pain to learn this. I don’t buy anything now unless I do a lot of research first. — J.R., Kerrville, Texas

The Fool responds:

It’s always best to make investment decisions based on your own research, analysis and thinking. Friends and family may mean well, but much of the time they haven’t done much digging into whatever they’re recommending — they’ve just heard about it somewhere.

Provenge, a drug to treat prostate cancer, was in the news for its ultra-high price tag, and its initial maker, a company called Dendreon, ended up filing for bankruptcy. Its assets were bought by Valeant Pharmaceuticals, which later sold them to a Chinese company.

Wildcat oil companies and cancer research startups sound like classic penny stocks with exciting stories that lure naive investors with promises of oil discoveries and cancer cures around the corner.

Keep reading and learning about investing — and researching companies before you invest in them — and your investment performance should improve. Perhaps buy some investing books for your friends and family, too.