The Benefits of "Do Your Own Research"

I admit it is hard to block out all the noise that we hear on a daily basis, media commentators, youtube videos, forum posters, blogs, everyone seems to be shouting some message and it always those who are the most controversial (whether bullish or bearish) who get the most air time.

When I was younger I used to get caught up in this, not because I didn’t do my own research but because I was second guessing myself or looking for confirmation from an external source. However, the fact remains that these “talking heads” do not necessarily know more than you do. They do not have a crystal ball. And if you apply yourself and spend the time to research a particular company or industry you too can become an “expert” in that field. When you are confident in your knowledge and ability you will not seek this external validation, your investment decisions will be clearer and you will sleep better at night.

So why am I writing this post today? Well for two reasons. Firstly I read two rubbish articles on the Sydney Morning Herald and News.com.au website today claiming that property prices were going to boom from now until 2013. Both articles referred to a BIS Shrapnel report, a report which I happen to have. Both of these articles correctly stating that BIS are anticipating growth up until 2013, however they then say that growth is expected to slow. This is incorrect. On page iii of the executive summary it says:

“However, the magnitude of price rises will be constrained by the spectre of rising interest rates, which are forecast to eventually peak and bring about a downturn in the market in 2013/2014”

A downturn is completely different to the “slowdown” that the major news sites claim will take place. A downturn implies prices will go down! A slowdown implies price growth will slow! Two completely different things! Any way the reason why I post this is to highlight that you must go to the source of the information to understand the true picture. Don’t just listen to the “talking heads” whether they are on the net or in a paper (and that includes me).

The second incident that led me to write this was some recent comments made by a “well respected poster” on a couple of forums. Now this person is intelligent and certainly understands the industry in question very well. As a result they do appear to hold “sway” over a number of posters who hang onto their every word. This same poster for whatever reason turned bearish and mentioned that they would be dumping shares in a particular company (yet the volume so far suggests otherwise). As a result of these statements a number of other posters suddenly got nervous and I thought I would take this as an opportunity to say that just because someone says something doesn’t mean they will actually do it. For all we know the person may be a net buyer and/or change their mind very quickly. Furthermore if you allowing your investment decisions and frame of mind to be swayed by someone else then it highlights a lack of belief in your own ability and research.

In summary, don’t look for confirmation from others, do your own research and you will be much better off for it.