Avoiding information overload in 3 steps
The Internet has certainly facilitated the information gathering process for investors who want to gain insight on a company to help them make an investment decision that best balances their risk tolerance and overall investment objective.
At the same time if you don’t know where to look for actionable information you could end up reading an enormous amount of data which might not add any value and take your focus away from what really counts.
When searching for company information, the goal should be to find information that helps you to understand company fundamentals so you can evaluate whether or not the company is an attractive investment opportunity. If you have the time and enjoy reading everything you can about a company then by all means do so, but for most investors who have a limited amount of time to devote to research it is better to focus on key company information. Here is a simple 3 step process to help you efficiently gain insight into a company:
- Read the company’s public filings (at least the 10K and 10Q reports) which can be found on the SEC website (www.sec.gov) or under the investor’s section of the company’s website. For further information on this step refer to our article entitled “Reading Company Public Filings”
- Setup a watch list to keep track of the companies you are interested in. Several websites provide this service for free. For further information on this refer to our article “Setting up a Stock Watch List”
- Enhance your knowledge by visiting relevant industry websites and financial news websites such as the Wall Street Journal, Forbes, Financial Times, etc.
Although you initially may find it difficult to discern what type of information is useful and what isn’t, with time you will be able to distinguish between the two. If you are new to the world of investing, the more your read the better. As a starting point we recommend you use the 3step process discussed above.