Turns out, anyone can do the same as the pros.
According to CFA Institutethere were 1.05 million professional grassroots investors globally at the end of 2018.
Suppose that 2% of the 8 billion inhabitants of the planet have a brokerage account, which will represent 160 million trading accounts.
There are undoubtedly many more individual investors like you!
How can individual investors leverage open sources to find investment ideas and gain an edge?
With an open mind, independent thinking, careful management and judgment after due diligence, individual investors can do well in the markets.
What do pros and individual investors do?
The 3 essential investment functions for fundamental investors are (1) generate investment ideas(2) portfolio building — find the right combination of asset classes (stocks, bonds, real estate, etc.) and buy an optimal amount for each position, and (3) risk measurement and monitoring.
All investors, whether Pros or Retail, should do (1) and (2) while Pros will model their risks with more quantitative tools using Excel, Bloomberg portfolio analysis and other software that can be expensive.
In particular, the quantitative investors do (1), (2) search for signals (transform and implement investment ideas into quantitative signals using models, and (3) portfolio construction and management (the measurement of risks being part of the construction.)
Reduce your portfolio risk by diversifying and knowing yourself
The best way for individual investors to reduce risk in their portfolio is to diversify – across asset classes, countries, sectors, industries and factors (eg growth, value, dividends, etc.) .). Investors can also make periodic purchases in fixed sums to take advantage of a decline in the share price to strengthen their positions.
Knowing your risk profile also helps. Here, I’m not just talking about the level of risk or loss you can tolerate, but also your risk needs, such as how much you want to earn and your investment horizon (less than a year, 1 to 5 years or more), your investment objective (capital preservation vs accumulation vs aggressive growth), but also your ability to take risks. Does your investment portfolio represent more than 33% of your total net worth? This will reduce your ability to take risks.
Now back to the main topic of what to read and what data to track.
Prepare to click on many links!
Do all investors need Bloomberg, FactSet, Refinitiv for news sources and analysis?
The answer is no.
Bloomberg, FactSet, Refinitiv, and S&P Global are all well-known data and financial software that not only provide insights, but also tons of portfolio and risk analysis for analysts and investment managers.
Given the proliferation of information from credible news sources and economic websites, let’s take a look at the different areas an investor can get their information from.
Where is the data?
(1) Know the macro image
We live in an interconnected world with China-mimicking supply chain issues affecting manufacturing and consumption in many parts of the world.
When oil prices skyrocket, some companies and countries benefit while others lose.
Are the United States or China more indebted countries?
Useful (and free) data sources are:
The World Bank data bank.
The United Nations (UN) Data.
(2) Follow the economic and market outlook
These financial and business newspapers are all excellent sources of market and economic information.
· Bloomberg Businessweek (a comprehensive, real-time analysis of global markets).
· CNN for economic, economic and geopolitical news.
I particularly like the Bloomberg Five things you need to know to start your day. You can subscribe to US, European and Asian editions. You can also subscribe to CNN 5 things know the most important news or S&P Global Market Intelligence for its daily or weekly news on the markets. You can add yourself to receive alerts in any area that interests you from these publications.
Watch these market indicators:
· VIX (the volatility of the S&P 500 index) to see the market’s risk appetite
· US yield curve (the 10-year Treasury rate minus the 2-year Treasury rate) to understand where economic conditions are heading
(3) Listen to advice from market gurus/influencers
These people not only have long-standing investing experience (and therefore have been through all sorts of market cycles), but also what they say and do can move the markets.
· warren buffetCEO of Berkshire Hathaway, known as one of the most successful investors of all time, and his right-hand man, Charlie Munger, Vice Chairman of Berkshire Hathaway. Read it Annual Letters to Berkshire Hathaway Shareholders.
· Ray Dalio, founder and co-CEO of Bridgewater Associates, the world’s largest hedge fund firm. Check out this free PDF chart and bonus chapter for his new book, “Principles for Coping with the Changing World Order» and his famous «Principles” book.
· Larry Finckco-founder and CEO of BlackRock, the largest fund manager in the world at the end of 2021.
· Cathy WoodFounder of ARK Invest, the innovative investment manager in active ETFs.
· Chairman of the Federal Reserve. Why should investors “follow the Fed” or “Don’t fight the Fed”? This is because with changes in interest rate policy and the expansion or contraction of the Fed’s balance sheet, the Fed has enormous influence over market liquidity, which affects future returns and trajectories. of your investment allocations.
(4) Discover innovative trends
Technology and data are transforming the world. In the USA, e-commerce jumped 50.5% during the Pandemic from 2019 to the end of 2021 while global venture capital funding more than doubled in 2021, fueling the growth of innovative companies.
It pays to follow trends seen by venture capitalists to find the next Amazon.
· Bessemer Venture Partners (Memos)
(5) Company search
If you want to learn more about any publicly traded company in the world, go to the Investor Relations section of the company’s website.
Here you will find earnings announcements, investor presentations, annual reports, and more. In the annual report, read in particular the “Management analysis” section and the letter from the Chairman to the shareholders.
In the United States, the Securities and Exchange Commission (SEC) requires publicly traded companies to file reports — 10Q (quarterly) and 10K (annual) detail their financial and operational results as well as the risks they face. They can be found under Deposits of the EDGAR company.
(6) Alternative data sources and new voices
Investment (buy-side) professionals typically spend their investment research budget on (1) researching sell-side analysts directly through payment or indirectly through trading or (2) researching independent.
The buy side refers to financial institutions that invest directly in the market on behalf of clients, while the sell side refers to investment bankers, stock brokers and analysts that create and promote trading products to public. Independent research is offered by persons who are not involved in investment banking activities and is considered conflict-free.
Over the years, many independent research firms have sprung up, while management consulting firms and alternative news sources provide valuable information on business, industry and market trends or offer unique insights. Here is what I am:
· DataTrekdiscussing the market, data and disruptions daily.
· Investing Reddit Communities (I believe many investment professionals also post and discuss on Reddit)
(The Morning Brew, Emerging Tech Brew, Refind and 1440 are my invite links.)
(7) Events and conferences
Investment managers love to attend industry events and broker investment conferences to network with their peers and hear the latest ideas. Often you must be a client or member to attend these investment conferences.
However, I recommend to all serious investors to join your local CFA Society which is found in 160 global financial markets. Not only will you network with investment professionals, but you’ll also attend members-only investment events and even take a CFA exam to earn the CFA Charter.
Bloomberg offers many events for audiences around the world, including topics on sustainability, thought leadership, business, finance, technology and lifestyle.