Not your average retail investment research

BARRY DUMAS, TRIVE SOUTH AFRICA: We have all seen, used, or compiled those research reports: the ones no retail investor ever uses or understands. We use clever words to uplift our personas and try to stand out from the crowd to be noticed while missing the point of grabbing our target audience, the retail investor’s attention.

On the flip side, fast forward to the present day, a post-pandemic era where the retail investor is informed, taking market share, and phenomena like meme stocks and gamification are all the rage.

Phrases like “Do Your Own Research” keep the retail investor on the Ferris wheel and in an altered state where they think anyone can perform open heart surgery. “I can do it myself” are gamified buzzwords that lead to uneducated investment decisions, and delusions of grandeur, not by choice but by the illusion that anyone can do any professional occupation nowadays.

The investment landscape is changing fast, but things sometimes do not change for the better, and unfortunately, not all of us are investment professionals by trade. Most, if not all, retail investors have everyday jobs that take up all their time. These investors need more time, or sometimes the know-how, to do an investment opportunity’s actual fundamental, technical, or even quantitative analysis.

That is why having access to outstanding research resources is essential to help and assist retail investors on their journey while educating themselves.

Why is research so important?

Simply put, investment research is essential for retail investors because it helps them make informed investment decisions. Retail investors invest their own money, typically through a brokerage account, rather than investing on behalf of an institution or a company.

Without conducting research, retail investors may make investment decisions based on incomplete or inaccurate information, which can lead to poor investment outcomes. Access to a reliable research source can help retail investors evaluate potential investments and understand their risks and rewards.

Here are 5 reasons why research is important for retail investors:

1. Understanding the company: Research can help retail investors better understand the company or industry they are considering investing in. This can include analysing financial statements, reviewing management team experience and evaluating the competitive landscape.
2. Evaluating risk: Research can help retail investors identify the risks associated with an investment. This can include regulatory or legal risks, market risks and company-specific risks.
3. Identifying potential opportunities: Research can help retail investors identify potential investment opportunities. This can include identifying companies that are undervalued by the market or that have strong growth potential.
4. Avoiding investment pitfalls: Research can help retail investors avoid common investment pitfalls, such as investing in companies with poor financial performance or facing significant legal or regulatory challenges.
5. Managing emotions: Research can help retail investors manage their emotions and avoid impulsive investment decisions. By conducting thorough research, investors can be more confident in their investment decisions and avoid reacting to short-term market fluctuations.

Investment research will always be topical; the way we present research has changed a lot since back in the day. It has become more simplified, visual, and to the point, which retail investors find informative in the fast-paced world. Unfortunately, the reality is that it is not that easy doing your own research; if it was, everyone could do it effectively and have the desired results.

Research is hard work – filtering through local SENS (or even US SEC) announcements and company financials and looking at the behavioural aspects is a challenging task to perform effectively daily.

For those retail investors who want to do their own research, education on the fundamental, technical and behavioural aspects will be critical to your success. Access to data and information is the commodity of choice; even then, you will only sometimes get it right. Not even the investment greats with all their resources get it right all the time, but the difference is that they get it right more often than those around them.

In closing…

In essence, research enables the retail investor to make informed decisions, which includes evaluating potential investment opportunities and the associated risks of that investment. Investment research is not for everyone, nor does the average retail investor have access to the resources professionals use to enable them to do the analysis effectively.

Education will be key for those taking on the task alone, but clever investors using credible research resources will give them a fighting chance against the market.

The question will remain: will the retail investors keep following the crowd and “do their own research”, or will the retail investors start doing their own research based on educated decisions?

To read more from Barry Dumas and the research team at Trive South Africa, visit the research blog here>>>