I’ve been thinking about investing some stocks and everyone is telling me that I really should research each stock, look through their financial statements and track the news and understand everything about them.
But the more I read, the more it’s just confusing me. And the more I'm asking if it's actually necessary?
If the company is doing well - making lots of money etc then the price will be high and if the company is doing badly - product recalls and losses etc, then the price will be low. Any information I read will be public information and isn’t all of this information already factored into the price? By definition, the price I pay is always the fair price at the point in time I buy the stock.
And the thing is, I may have opinions about the economic or industry outlook, but I’m not an expert here - even if I was armed with more information, surely, I can’t predict the future any better than experts whose job it is to analyse stocks. Even those experts disagree and have their own opinion about what will happen.
Basically, what I’m saying is the only sure thing I know is the price I paid for the stock is the fair price at the time I buy it. Everything else is subject to bias and speculation.
So am I better off to just not even worry about doing any in depth research and just look at a few basic attributes like
- how volatile the price movements have been
- what type of asset class it is (eg. blue chip, speculative)
- P/E ratio
These things won’t actually help me predict how the stock will perform but will give me information about whether the stock is suitable for my own personal situation and objective and the level of risk I'm willing to take.