Sources of Investment Information It is very important to gather relevant information for the purpose of making sound investment decisions. There is no other way for creating a goes successful portfolio. While gathering all the relevant information, it will not guarantee that the portfolio will be able to meet its objectives. This is a very common mistake as people tend to make investments without doing the proper analysis of the investment instruments. This type of behaviour g against the primary principle of investment which never initiates any position in an instrument which is not fully understood by the investor. It is very important to understand the investments for ensuring the success of the portfolio. Such information may be obtained by reading various books, newspapers, magazines and journals. Following are the four main type of information which an investor should gain:
1) Economic Developments and Current Events: This type of information is useful for determining the prevailing investment environment.
2) Alternative Investment Vehicles: This type of information lets the investors know about the new options in the market.
3) Current Interest Rates and Price Quotation: This helps in raising awareness of the current opportunities and for monitoring the investments.
4) Personal Investment Strategies: It is important to ensure that the investor remains alert about latest investment techniques and tools.
These points will ensure that the investment potential is increased to the maximum and the chances of loss are minimized. Such information may be obtained from several different sources such as annual reports, journal, trade magazines and newspapers. There are also specialized websites where investors can gain more information about their target firms. Apart from these, there are also advisory businesses which provide such services in lieu of fee and charges.
Some major sources of information are as follows:
1) Annual Stockholders’ Reports: The law requires every public traded company to release an annual stockholders’ report and present it to various stakeholders in the firm. It includes various financial statements such as balance sheet, cash flow statement and income statement. It also provides summary statements for previous years. Through this report, the stakeholders may also receive information about the company objectives, purposes and developments. Such reports provide insight about the future course of the action to be adopted by the company. Investors can obtain these reports directly from the company or from their brokerage houses. Many libraries also keep corporate stockholders reports in their record.
Following are some of the ways by which the investors may receive the best out of these reports:
i) Start with the Highlights or Selected Financial Data
Sections: Investors can get quick information from these sections as there are summarized versions of the financial statements of the past couple of years. The investors should look out for metrics such as revenue, revenue growth rate, net income, earnings per share, dividends and assets.
ii) Read the Chief Executive’s Letter: Such letters should be read critically as negative information is generally provided in a positive manner.
iii) Operational Details in Management Discussions: This section is also very important as it provides information such as sales and earnings of the company. The investors may also know about the litigations the firm is involved in and the debt and inventory level etc.
iv) Review the Financial Statements and the Notes: It is important to carefully study the financial statements of past couple of years. This helps in understanding the trends and pattern of revenue, profitability and cash position.
v) Read the Auditor’s Report: An unqualified auditor opinion generally extends to two paragraphs. The third paragraph starting with phrases such as “except for” or “subject to” implies that there are certain reservations.
2) Financial Press: The local newspapers are also an important source of information about the companies. Such information may be obtained from regular newspapers. However, there are also specialized newspapers which only provide financial and other related information about the company. Some of the prominent publications are Business Standard, The Economic Times, Financial Chronicle, Financial Express, etc. There are also magazines such as Outlook Business, Business India, Business Today, etc., which are excellent sources of business news.
3) Internet: In current times, internet has emerged as an important source of information. This is also true for business news. There are websites which have specialized sections devoted to business and market news. Apart from these, there are specialized websites which deal with specific sections of business information.
For example, the sites such as Investopedia seek to provide educational information about business to the investors while websites such as Google Finance are more concerned about latest financial news.
Following are the main benefits of using internet for this purpose:
i) Internet is easily accessible and thus may be used for providing information to people scattered around the globe. It is also easy to visit the company websites to gather more specific information.
ii) The company website generally has most upto date information. It is also in depth and accurate information. There are other websites such as Yahoo, Google, etc. which may be used for collecting information about a large number of companies. These websites also provide information about stock markets, historical data and charts. Some of these sites also provide stock screeners which may help in building a portfolio and analyzing it. Investors may also use advisory services such as Morningstar, Value Line and Standard & Poor. While a large amount of information is free on the internet, some of the services and information is only available through the payment of fee or subscription.
4) Stock Advisory Services: The investors can also use professional stock advisory services. Such businesses provide a large amount of material in the form of research reports, updates and news. Before choosing an advisory services, the clients must check the past record of the service, the quality of the information and the fees charged. The information must be reliable and easy to use. Different advisory businesses offer different kind of information. It may range from simple list of stocks available to highly complex research reports and financial models required for the valuation of the business.
5) Corporate News: The companies are required to release updated information about the company’s business. Such stipulation is required by the law. The investors should pay proper attention to such circulars and information provided.
Any person, even if they are not an investor, may obtain annual report of the company. Such report may be available on the internet or the person may write to the company for being provided such report.
