If you’re interested in investing and choosing your own investments, then you may look at a shares magazine for ideas and tips.
Using a shares magazine might seem like a good idea as they sell tens of thousands of copies every week and feature some of the biggest investment managers in the industry.
We are always after shortcuts in life and if you can find a place that tells you where to invest rather than doing your own research then why not?
The problem is, using a shares magazine is no guarantee of success and in fact may be leading you down the wrong path when it comes to achieving your investment objectives.
The problems with a shares magazine
A shares magazine can be a good way of alerting you to information that then requires your own research, but you shouldn’t blindly follow what’s suggested. Here’s why.
#1 – You’ll be subject to the author’s biases
Investing and stock picking especially conjures up all sorts of behavioural biases.
Biases such as overconfidence bias, confirmation bias and recency bias.
Even if you know about these biases and have studied them you are still susceptible to them. It’s how our brains are wired.
So, can you be confident that the author hasn’t fallen foul of one of these?
#2 – They tend to focus on what’s working now
If an author of an article in a shares magazine is going to start talking about stock tips, they will focus what has done well recently.
They don’t want to be seen recommending something that has produced poor returns, it will be hard to justify it.
However, just because something is working now doesn’t mean it will continue to work.
A lot of the times a good investment is down to luck. You just happened to be in the right place at the right time and a certain economic condition suited your investment. It’s very hard to predict these things in advance.
#3 – There may be a conflict of interest
A shares magazine will make a lot of money from large investment firms advertising in the magazine.
Can you be sure that this doesn’t influence the types of share tips the author might write about?
After all, an investment firm paying large amounts to advertise is not going to be happy being criticised as a bad investment, are they?
#4 – Track record of success
If someone is producing investment tips in a shares magazine what is their track record of success?
Surely if they had seen lots of success they wouldn’t be writing in a magazine?
There’s a phrase that goes ‘those that can, do and those that can’t, teach’.
What to use instead of a shares magazine
Instead of trying to take shortcuts when it comes to your investments, accept that you will need to put a bit of effort in. If you do this, you could be handsomely rewarded. After all, the whole point of investing is to find financial freedom.
Consider following these research strategies instead of a shares magazine.
#1 – Be clear on your strategy
Before investing, you need to know what you are investing for.
What’s your timeframe? How much do you need to make and how much risk are you prepared to take?
Morgan Housel says it best in his blog ‘Play your own game’. What might be a good investment for your friend might not be a good investment for you as you may both have different objectives.
#2 – Consider multiple sources of research
If you do like reading a shares magazine, then consider it just one part of your investment research.
Look to analyse any ideas using different data and viewpoints. Always try to look at both sides of the argument when it comes to an investment. Don’t get caught looking for data that will play to confirmation bias.
#3 – Read up on the world’s most successful investors
One element of your research should be looking to learn lessons from the world’s most successful investors.
Investors that have performed well over years and years and multiple different economic conditions.
You can usually find a few traits they all share.
#4 – Work with a wealth manager
You may find the whole investing world too daunting and if that is the case, consider working with a Wealth Manager or Financial Adviser.
A good professional will find out exactly what you need and will make investment recommendations to you aligned to the level of risk you are comfortable with.
It saves you having to pick your own investments.
#5 – Use a fund
If you don’t want to go down the road of taking full advice and would like to keep some control over your investment ideas and choices then consider using investment funds rather than picking individual stocks.
Picking individual stocks is generally riskier than choosing funds as an individual company could easily go bust if certain conditions go against them. This means losing all your investment.
However, a fund will usually invest in about fifty companies so there is little chance of losing all your money.
There are so many different funds out there that can match your investment objectives.
You don’t need a shares magazine to tell you what to do. With a little bit of learning in the right places you can feel much more confident your investment decisions will be built to last.
Carl Roberts, Director
If you want to learn more about this topic, please find the link here.
More information about our fund the YFS Intelligent Wealth Fund can be found here: Hargreaves Lansdown or AJ Bell
Risk warnings
The value of investments and the income derived from them may fall as well as rise. You may not get back what you invest. This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action. All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs practice. Levels and bases of tax relief are subject to change. This blog is based on my own observations and opinions.
