Back by popular demand, here are even more commonly asked investing questions for new investors! Please make sure you pass on any questions to me by clicking here:
If I don’t do my own analysis, where can I find analyst research and recommendations on a particular company's stock?
Well obviously, in addition to the metrics we have discussed many times, you should seek out the opinions and advice of analysts who cover the stock to understand more about its sector and the overall industry in general. It certainly does not hurt to learn what experts in the industry are saying about the stock. While the big banks spend millions of dollars per year for access to the best of the best research, you do not necessarily need to go through all of this fanfare. Analyst research can be found for free through several very reputable, independent sources: Morningstar and Yahoo Finance are some of the big ones, but I’m biased and also love Seeking Alpha. Also, if your brokerage account is through a major firm (like Scottrade, TD Ameritrade, Charles Schwab) sometimes you can get access to analyst research and recommendations free of charge.
Should I be investing in hedge funds?
It depends really: many hedge funds buy financial products that are not regulated by the SEC, so it can be hard to establish what the real value should be for the products in order to maintain liquidity (i.e. the ability for the funds to easily be bought and sold). That being said, investing in hedge funds is definitely NOT recommended for novice investors. Really, they are only an option for those who can be considered an “accredited investor,” which is someone whose net worth exceeds about $1 million or an annual income of $200,000 in two consecutive years (or a joint income with their spouse that exceeds $300,000 for the last two years).
I’ve heard that hedge funds eroded market opportunities, is this true?
No, hedge funds do not erode market opportunities for longer-term investors. In fact, many investors falsely assume that they can’t compete against hedge funds in the marketplace and all odds are stacked against them. There are some strategies, such as high-frequency trading, that average investors obviously cannot compete with, but even then hedge funds have a large degree of influence over how the broader market trades. They still offer a few opportunities for investors looking to grow their money over the long term…especially if you have a lot of money to spare.
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