Without appropriate knowledge, investing can prove difficult, despite the vast array of financial instruments available in the market. However, as Benjamin Franklin once said in his book ‘The Way to Wealth’:
“An investment in knowledge pays the best interest.”
Knowing where to put your hard-earned savings and how to evaluate a company is necessary if you want to invest with confidence and minimize loss. That’s why we have compiled this guide to help you on your personal investment journey.
We’ll discuss what investment research is, its importance, sources of information for this research, and tools to help you make better investment decisions.
What is Investment Research?
When you evaluate a company’s financial instruments in order to understand how the company is performing, you are carrying out investment research. Investment research helps the investor identify companies that are viable from those that are not so that the investor can make informed decisions.
While there are investment companies that have a system for carrying out investment research, individuals looking to conduct investment reach on their own must-know where to look for information.
Sources of Information for Investment Research
Every investment research begins with data collection. One of the most important sources of information for investment research is corporate filings. Corporate filings detail a company’s past and present financial performance and its future prospects. While it may not be interesting to read, corporate filings contain a treasure trove of information about how a company manages its resources, generates profits, and what you can expect as an investor. This filing is publicly available for companies on the Nasdaq or NYSE exchange but may be difficult to find for smaller companies.
Another useful source of information is the Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. Information submitted to the SEC is automatically collected by this service and made available for free by the SEC, although it may be difficult to interpret. There are also third-party services that charge a premium to help you better take advantage of this service.
A third source of information for investment research is analyst reports from investment banks or independent research firms. These reports provide detailed professional analyses of specific companies or industries. While some of these reports are available for free, others require you to pay a subscription fee for access. Social media platforms like Twitter or LinkedIn and online forums like Quora and Reddit can also provide useful insights about a company as financial professionals and industry leaders sometimes share their insights and opinions on these platforms.
Using Tools for Investment Research
Aside from information sources, there are also tools (like charts, financial ratios, signals, etc) to help investors make informed decisions. These tools evaluate everything from historical data to stock performance, industry trends, managerial competence, etc. If you want to know how to apply them you can attentively study the latest guides that cover the most relevant information.
When using these tools, you can opt for fundamental, technical, bottom-up or top-down approaches to analyzing.
Whereas fundamental analysis evaluates a company’s financial and economic fundamentals to determine its intrinsic value, technical analysis involves analyzing charts and patterns to predict future price movements. The bottom-up analysis evaluates a company’s products or services, management team, competitive landscape, growth prospects, and general fundamentals to assess its potential for long-term growth.
The best approach is to use a combination of tools and techniques to conduct thorough investment research before making any investment decisions.
Conclusion
Without knowledge, investment is no different from playing a lottery with an equal chance of winning or gaining. That’s why it is important to learn how to mine data about companies before choosing to invest in them. This way, you can swing the odds in your favor and improve your chances of winning with every investment.
