Investments and information: A Newbie’s Approach

The following is a guest post about newbie investments. If interested in submitting a guest post please read my guest post policy and then contact me.

In today’s state of technology, investment opportunities are available to everyone. The myriad of investment information can be confusing and should be handled with consideration.

Investing in the modern world and investment opportunities have seen vast changes within the last century. The very foundations and principles of investing, such as the purchase of an asset with the prospect of increasing its value, have remained the same until now but the methods on deciding what to invest in has changed dramatically. Information has always been the deciding factor for investing. By gathering the right data surrounding the asset in consideration at the right time puts the investor in a better position to assess the investment opportunity. Deciding on what information to use among a plethora of data surrounding an asset helps to make the difference between a successful and an average investor.

Only a few years ago, a trader’s investment plan on whether to invest in a particular share would rely on the publication of financial statements by a company such as the income statement, balance sheet, return on equity, and the conduct of ratio analysis by using data from those statements. Today’s immense volume of information at the fingertips of investors is amazing, with financial statements only being a fraction of the data available about an asset. Traders can easily get access to business data and statistics, as well as reviews and commentary by financial analysts and CEOs. There is a large number of traditional business resources in the form of newspapers such as the International Business Times, Financial Times, and the Wall Street Journal as well as a host of highly respected online resources such as Reuters and Bloomberg.

The current state of technology and the growth of the internet have made it easy and simple to get a constant feed of data about price movements of an asset. Business websites, as well as investment brokerage firms through their online media, provide real time information about the current values of tradable assets, whereas in the past traders had access only to daily prices published in the newspapers. This evolution assisted greatly in bringing financial trading closer to the masses rather than just to a small number of individuals and firms. Almost anyone can now enter the markets and choose to trade from a large choice of financial assets including stocks, derivatives, forex and commodities through electronic platforms offered by investment companies and forex brokers.

It may sound as if the tons of information available to traders are the perfect recipe for successful investing, but in reality too much information can be confusing. It is simply not possible to stay ahead and digest all the data available about an asset and certainly not at the pace that they get published. Newbie traders are likely to get confused by the constant arrival of market movements. Even though there are software programs developed for the summarisation of data, because of their properties they fail to capture important details.

Inexperienced traders sometimes have the idea that large and famous companies, or very liquid forex pairs present the best opportunities to invest in because of the publicity they get in the media. The truth is that the decision of where to invest is largely dependent on the individual investor’s risk profile, whether he or she is risk prone or risk averse, and also on the strategy chosen to follow. Experienced and successful traders many times advise on choosing a specific strategy and sticking with it in order to be able to control investment entry and exit points, and also to have the ability to go back and monitor their performance based on the same strategy.

Successful traders have to choose specific sources of information to use in order to base their trading decisions. They do not pay attention to all pieces of data simply because there is always data to hold them back from taking the risks they set as part of their strategies. If one digs deep enough in the mountain of information available, it is likely that he or she will come up with data to against the placement of an investment position chosen by his or her long-term strategy. The availability of so much financial information can be overwhelming and should be dealt with careful consideration by an investor who wants to stay on course to the path of successful trading.

by David Parker

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