Long-term portfolio diversification, like journalism, requires diversified (and credible) “sources.” Investors can get the scoop from Securities and Exchange Commission (SEC) filings, company announcements, financial news organizations, and other publicly available resources. But that’s just part of the story. It’s also a good idea to dig a little deeper for creative ways to inform portfolio strategy.
A well-informed investor incorporates many reliable sources of investment information into long-term portfolio strategy and decisions, said Keith Denerstein, director, guidance at TD Ameritrade. Part of the effort involves being open to voices and ideas you might not agree with or that might clash with your investing worldview.
“If you’re only relying upon information sources that confirm your views, you could fall victim to confirmation bias,” Denerstein explained. “By deliberately seeking varied sources and perspectives, investors can help ensure their individual hypotheses are constantly being challenged, and that will strengthen conviction around the investing decisions they make.”
Investors have access to virtually unlimited amounts of information but limited number of hours in a day to process it all. All investors should weigh quantity-versus-quality considerations as they establish their sourcing model.
Here are a few top information sources for investors.
U.S. Securities and Exchange Filings, Including the 10-K and 10-Q
Publicly traded companies in the United States are required to report details about their businesses in regular filings with the SEC. Investors can get these filings for free through the SEC’s Edgar online portal. There are hundreds of different types of filings, but investors can focus on a handful—namely the 10-K and the 10-Q.
The 10-K, which companies often file at the same time as their annual reports, covers critical topics for investors such as risks to the business, financial health, management experience, and other areas of “material” interest to shareholders. The 10-Q, filed quarterly, reports revenue and earnings-per-share for the previous three months and often includes other details that can move share prices, such as an updated business outlook from company management.
Company Websites, Investor Relations, Earnings Conference Calls
Corporate investor-relations websites offer another handy way to get to know a company, such as SEC filings, press releases, information on corporate governance, and upcoming events like quarterly earnings reports and annual meetings.
Numbers are important, but so are people and human voices. Want to get in the same “room” with the CEO? Investor relations will post links to quarterly earnings conference calls with company leadership (live, on the day earnings are released, as well as replays). Earnings calls can offer insight and nuance beyond the financial numbers and sometimes what executives say during the calls can move the company’s share price.
Financial News Networks, Social Media, Online Investor Forums
News services like Bloomberg and CNBC have wide followings and usually cover the biggest market stories of the day, but they don’t catch everything. Investors looking for news on smaller or more obscure companies may need to search elsewhere. In recent years, many retail investors gravitated toward social media platforms like Twitter or online forums like Reddit.
“Social trading,” in which investors plumb social media platforms for recommendations and “hot takes” from market experts, or just day-to-day banter among investors and traders, may offer a “real-time” window into the minds of different kinds of investors. But investors should also apply a healthy dose of skepticism to anything they see online, especially in anonymous forums, Denerstein reminded.
“Online message boards or television pundits can be good sources for new investing ideas,” he said. “But it’s important to take the additional step of validating those ideas through respected and well-researched analyses published by objective financial institutions or media.”
The TD Ameritrade Network*, for example, provides investors with access to market education material and a YouTube channel featuring daily market updates, as well as third-party research published on tdameritrade.com and available through the thinkorswim® platform.
Charts and Other Technical Analysis Tools, Plus Hybrid Models
Where might a stock price or market be going? Nobody knows for sure. But it can help to see where it’s been. Enter a ticker symbol on tdameritrade.com or thinkorswim and pull up a daily bar chart for the past 12 months, then add a technical indicator such as a simple moving average or an exponential moving average.
Charts, combined with moving averages and other technical tools, are not predictive but can help investors get a sense of short-, mid-, and long-term price trends and whether a trend may be about to go the other way.
There are also some alternative sources that are kind of a mash-up of information from a variety of places. These include so-called “Mosaic Theory,” which involves collecting public information about a company to ascertain its underlying value, establish buy or sell recommendations and stock price outlooks, or make other determinations or judgments.
The Investor in the Mirror (That’s You)
Ultimately, your best source of information is you, the investor, because you’re in the best position to define your long-term financial goals and risk tolerance and to make well-informed investing decisions appropriate for you and your family.
Investors have more information sources than ever, and that’s good, but also consider there’s such a thing as too much information, as well as the wrong kind of information (specifically, the insider trading kind, which the SEC defines, in part, as “buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security”).
It’s important for investors to seek diverse, reputable information sources, including professionals, analysts and news sources following the market, and in some cases brokers and other advisors, and also know when they’ve got enough information to press “buy,” Denerstein said.
“Paralysis by analysis is the last thing any investor wants,” he commented. “It’s understandable investors want to be confident about a decision before committing to it, but investing carries inherent risk that no amount of analysis can completely eliminate. As an investor, you want enough information to make an informed decision, but not so much that it inhibits your ability to act.”