There appears to be an ever increasing number of stock market related websites and no shortage of stock tips and market advice available to us all. But who should we listen to, and where are some good sources of stock market insights?
As readers of my blog and editorials will know, I have mentioned on numerous occasions that my own comments regarding the stock market should be treated as just my own personal observations and that I have no ability to predict the future. I do not consider myself an expert in any form but I do invest and manage investments for a living. (and at the moment I am still eating regularly)
But there are many people on the web and in the media who do put themselves forward as “experts” and so perhaps the following points will help you determine the good, the bad and the ugly sources of stock market advice.
1. Watch out for the self titled “experts”. Ask yourself does the “expert” actually earn their main income from investing or rather writing about investing? If it is the latter then I would question how much of an “expert” they really are.
2. Be wary of the experts and market commentators that just make vague statements that leave room for them to be right no matter what direction the market moves in. A classic commentary from some of these people would be something like this “the Australian market has shown great strength recently and has rallied strongly. This rally may continue unless some further bad news drive stock prices down”.
3. Beware of the technical chartists especially those who offer to show you how to make money if you attend one of their courses or buy their software. You can learn plenty about technical charting from free sources on the Internet. (such as www.investopedia.com or from many of the links provided on this site) Remember technical charting is not a guaranteed road to riches and has many limitations.
4. Beware of the people who tell you they have picked most of the past corrections. Depending on your definition of a “correction” there could be 1 or 2 every year so if I say there might be a correction in the next 12 months the chances are I will be right. Some so called experts are always predicting a correction so I guess eventually they will always be right by default.
5. Listen to company CEO’s, CFO’s etc. They might be a little generous with the way they talk about their own organisation’s performance but they are the people at the coal face so to speak. Also you can get a good feel for how businesses may fare in the short to medium term by reading company announcements or watching interviews their CEO’s etc do. (on T.V or via the web on a site such as Bloomberg)
6. Brokers and analysts are not evil. They often maligned by financial journalists and others but the fact is they often put in the hard yards and produce some very good research and company outlooks. Of course do not use their research as your only source of information but disregard 50% of the criticism directed at brokers and analysts by journalists as jealously. (I am not a broker or analyst by the way)
7. Pay attention to what fund managers are saying and what stocks large investments fund own or are buying/selling. You can see for example what stocks Listed Investment Companies (LIC’s) hold by reading their company announcements and portfolio updates. (available from the ASX website) I am not saying you should follow the fund managers, but at least you may be able to get a feel for what sectors people are moving into or out of.
8. Tread carefully when dealing with stock market chat rooms, online bulletin boards, red hot stock tips you heard from the taxi driver on the way to the airport and that mysterious e-mail that landed in your inbox telling you of an incredible stock buying opportunity. Personally I tend to treat all these sources of information as unreliable, although I do accept stock suggestions from little green aliens.