How Much Research Do You Do? —
Weekly Ramblings of an Australian Stock Trader - incorporating
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How Much Research Do You Do?

I was glancing through the local newspaper this morning and came across a thought provoking article. It stated that more share traders/investors need to do more research before they buy a stock.

At least a half of all Australians now invest directly in the share market in one form or another. But as to what motivates them to buy and sell is an elusive mystery. Apparently less than one half do their own research when ever they make a buying or selling decision. And only one third actually do it consistently most of the time.

Of those that do their own research the most popular method used is searching amongst the various chat rooms and forums that are available on the net.

They predominately look for comments made about the various companies in the media’s eye at the moment; plus any analyst’s reports and other annual reports that are also available at that time.

Three quarters admitted that “Gut Feelings” played a major part in their decision to buy and sell shares
. And nearly half of those based their decisions on a “Hot Tip.” Most traders/investors do realize however that they have made a decision on insufficient information.

When asked if they sought professional advice before buying shares 56% responded “Sometimes,” while only 18% responded all the time. Amazingly 26% never seek professional advice at all.

The survey also showed a massive 78% never even valued a company before buying their stocks. Only 5% of the traders/investors follow the disciplined strategy of value investing.
It makes you wonder what methods the other 95% of traders are using?

While we are on the subject of research I wondering how much research was done by the traders who sold off all their shares in the last couple of months or so’?

Ideally if your stop losses were activated by this correction as it started to go downhill. You would have been in the envious position of being able to buy some of them back again at bargain basement prices.

You would not have to worry about any capital gains losses as they will be more that compensated for when the market resumes its way upwards again. Rest assured it will as this correction is only one of many that will occur from time to time in the years ahead.

The main thing is to be prepared for them, and of course “Do Your Research.”

And remember that when a sale transaction is completed on the sharemarket that there is a buyer for every seller and vice versa. Irregardless whether the market is going up or down.


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