Somewhere on Wall Street Yoda is wearing a suit and tie.
“Cash flow good, invest you should…”
Trustworthy wisdom. Mentor to apprentice. Dad to son. Wall Street to Main Street? Which of these does not belong? Sad to say but it’s obvious. Too big to fail proved that. It didn’t happen a generation ago. The scars are still fresh for many.
Who can you trust?
Types of Investment Advice
Are you blue collar or white collar? What is your level of market sophistication? How much do you know about the market?
Are you willing to do the work or will you hire someone to do it for you? If you do the work yourself how do you scan for new investments? If you hire someone how do you know you can trust them to do the research?
Good investment advice comes in two forms: Research you trust or an advisor you trust. Your level of market knowledge should dictate which of the two you apply. The more help you need, the more you should be willing to pay for it. If you think a professional is expensive try hiring an amateur.
There are two types of research. You can dig up the numbers and stories yourself or you can subscribe to investment research services and tools. Your level of knowledge will help with this decision. Time can also be a factor. You may not have the time or want to devote the hours to research.
Paying for comprehensive research can be worth its weight in gold as long as you understand the analysis. Einstein said “if you can’t explain it simply, you don’t understand it well enough.”
A popular and unfocused method is taking advice from a TV show. The vast disclaimers required should be enough to discourage you from taking this action but the truth is its entertaining and convincing.
Types of Investor Needs
What degree of help do you require? Are you blue collar and simply need to trust someone with keeping your 401K safe or are you a professional who is a self-directed investor?
Knowing your skills and needs should dictate the advice you seek. Cheap is not always better. You wouldn’t go to the cheapest doctor, why would you place money in the market with advice from a free report?
Three Forms of Investment Research
Do it yourself. This is the research you can take responsibility for. There is no mystery about how much work was done. You are creating your wealth. You are in control of your decisions. This is a great decision if you have a certain level of market knowledge and you trust yourself to make the right choices.
Unless you are a financial professional you should invest in research. You are paying to get the full story. You need to do some work before you decide which research to trust. You need to investigate how a particular research firm determines its rating and ranking criteria.
It is crucial you understand the story and method. You will never trust the investment research if it doesn’t make sense to you. Stay away from a hidden/secret method. Investing is not a mystery. You can read more about how New Constructs investment research works here.
Stock Brokers are paid to sell. They make money to keep you active. Yes they are licensed and yes they are monitored by FINRA but they have training to open new accounts and to keep clients’ accounts active. They are not trained to read investment research. They are taught to make 500 calls a day.
Remember, we are talking about investing. Not active trading. If a stock broker wanted to get deeper into long-term relationships they would become a Registered Investment Advisor.
An RIA or registered investment advisor earns a fee based income. This is different from a stock broker who earns commissions. Advisors build assets under management and earn a management fee for the total assets. Their goal is financial advice.
Most advisors receive investment research from a parent company. Should you decide to go this route you should ask how the research is performed. You have every right to demand a good answer if they are going to offer advice on stock picks.
To give you a benchmark, the New Constructs model for determining value digs deep into the footnotes, no stone is left unturned. It is the most comprehensive research on Wall Street.
There is a difference between best advice and what you may need. We all come to the investing world with different resources and experience. Use this guide to help make the decision.