In order to make your investment decisions, it is important that you consume the right information from the right sources and then take steps towards investing your hard-earned money in a specific investment or range of investment avenues.
Reliability on different sources of information is crucial but too much reliance on one newspaper, online blog or friends or family can prove to be damaging to your portfolio. Just the way diversification helps you get higher returns with less risk, consuming market information from various dependable sources helps you make an informed decision in order to make those intelligent investments.
Deloitte’s ASX Australian Investor Study 2017 report found that most investors are self-directed and choose to conduct their own research. Seeking some form of professional advice (financial planner, stock broker, accountant or lawyer) is the second most popular choice. The below chart shows sources of information used by investors as per household income of those of Australian investors:
It can be seen that the majority of the investors rely on their own research – which makes me think, where are we researching from and how reliable are those sources? The answer to this lies in the type of portfolio you have or the portfolio you want to build based on your investment goals.
For example, it is not necessary that whatever Warren Buffett suggests would be an ideal investment for you, hence there will be little relevance in that news for you because his investment goals can be different from yours.
Similarly relying on the so-called market experts that make headlines would not be recommendable as well. We touched on this in one of our Monday Markets, but to reiterate it, have a look at the below comments that made headlines in the leading financial newspapers at the end of Financial Year 2016:
– ‘Investors are bracing for another year of event-driven volatility on the Australian share market, against a backdrop of subdued growth and earning’
– ‘Parts of the Australian market are already in bubble territory’.
– ‘The Australian market would at best struggle within a narrow range in 2016/2017, caught between bouts of market paranoia and a sobering backdrop of low growth, low inflation, and low returns.’
What happened though? The ASX 200 accumulation delivered a return of more than 13% in the Financial Year 2017!
Some of the reliable sources to stick to would be:
– Your financial adviser
– Proven academic theories that are easily available online
– Company’s financial statements
– Fundamental & Technical Analysis tools
With the advent of real time data and social media, information is available at your fingertips, but the extent to which it can be reliable is still a question.
If you would like to discuss any of the above with us, feel free to contact us. Don’t worry, we are licensed to be reliable!
– Aakash Mehta –