I recently started investing heavily in the stock market and as you can imagine I’ve been heavily researching stocks as a result. Performance histories, gains vs index, gains vs sector averages, dividend or no dividend, acquisition targets etc … and I’ve learned a few things along the way that I would like to share with you:

No one is right

The first thing I noticed when researching specific companies was that it seemed for every article saying Company A was a must have because of growing revenue, lower operating costs etc … there was an article saying that Company A was to be avoided at all costs because of debt loads, slowing growth etc … I quickly realized there is no such thing as a must have company for instance Netflix would seem like the perfect stock as they boost their own programming and more Americans cut cable and use streaming media services. Only problem is that if you bought their stock a month ago (NFLX), you’d be down 22% (for which there are plenty of articles telling you to buy/short the stock).

For the most part, stocks fluctuate on a daily basis through pure randomness and it’s largely the result of institutional investors who are trading 100,000 shares or more rather than 100. A stock going up 2% or declining 2% in a day isn’t the result of a complex web of forces that can be decoded to figure out how to profitably trade any position … it’s just random barring any big (real) news affecting the company.

That being said, month over month losses are common among funds and large investment portfolios managed by so called experts (that’s how people became so suspicious of Madoff because they never experienced them). You can trade in unison every stock held by Cramer or Buffett and lose money … the market is a casino and there’s no guarantee you’ll win.

Beware of Forbes/Seeking Alpha Etc …

The reason for the differing of opinions is that user generated content makes up the bulk of most financial / financial news sites. Aside from news pieces on acquisitions, bankruptcies and product announcements – the only other real news tends to be syndicated press releases. Everything else is user generated and depending on where a particular author is on a stock you’ll either think a company is on the verge of bankruptcy or about to hit a home run and decoding a company’s actual position is an art form. The confusing part is that people implicitly associate Forbes and other publications with being “the word” on finances not realizing many of the authors they read are 1099 contractors writing to boost their own portfolios.

Authors are required to disclose any positions on a stock they cover but unless you read the fine print, you could find yourself making a terrible move.

Ignore everyone, research yourself

Numbers don’t lie. They can be interpreted in a myriad of ways but they are the only source of truth. Figure out what to look for and invest any way you want. Odds are you’re as likely to make a 10% return picking stocks that match college team abbreviations than spending 200 hours pouring over 10k statements and historical trends.

Photo credit: Thomas Hawk