BCL Legal Recruitment
0845 241 0933

BCL Legal, The Brief

News, opinion, interviews and business insights from legal industry leaders

Subscribe

Justin Urquhart-Stewart on the third rule of investing: Research

Seek and ye shall find – well maybe, but only with a bit of research.

Good research is not about guesswork, pages and pages of statistics or even some complicated mathematical equation to establish the odds as to whether the winner is going to be on black or red. No, good research is all about knowing your subject, and conducting a reasoned evaluation leading to a viable decision. Thus please beware the tip sheets, – the newspaper and magazine “buy” recommendations. Frankly these are no better than the racing tips on the sports pages.

For many years some such magazines used to pay a small amount per “tip” and thus their strength and veracity were at the very least dubious. Many others I have seen come from the larger institutions and thus apply to institutional trading rather than to individuals, and by the time they reach the wider public they are as fresh as an old Brussels sprout and about as useful.

The art of good research is focus. When faced with a globe of investment opportunities in a myriad of different asset classes from shares to currencies and commodities, it is so easy to be drawn in by the siren cries of different investments as they call out for your money. However it is when these calls are at their loudest that it is time for some discipline.

If you want to be a successful share investor then choose a small number of potential investments and study them carefully so that over a matter of a few months you will quickly become far more expert in them. The good news is that these days there are a legion of information sources often available very cheaply or more often free from the web. With on line notifications of news on your search engine, you can often be as well informed as any city analyst. In fact you will be surprised to know how much you do know, even compared to some of the supposed professional analysts themselves who certainly don’t always seem to be as knowledgeable as they would claim. But which to choose?

The art of this is to keep life simple and I would suggest that you consider just 6 stocks. I would select some quite large companies traded on the UK market and within the FTSE 350. Why? Well you need your companies to have a good news flow, as well as to be easily traded. The temptation is often to go for smaller companies on the basis that you can get some dramatic price rises in percentage terms (and falls!), however what you can often find is that trading in smaller companies can be somewhat fraught. Not only can the spreads between the buying and selling price be like a tub of margarine, and thus lose much of any potential gain you thought you had, but also quite often there may be no purchasers to take the stock off your hands!
Very frustrating and a waste of your investment monies.

www.7im.co.uk

Leave Comment

Please be polite. We appreciate that.

Your e-mail address will not be published and required fields are marked.