Stock analysis?
It has often crossed my mind, especially when reading through the many postings on the likes of the TMF message boards discussing stock A or stock B, just how much faith the smaller private investors tend to have in their own stock selection ability.
Let's face it, where money's concerned, there are many out there who are probably prepared to cross the boundary. Football matches, horse racing or any other form of gambling have regular bribes or fixes associated with them. If there's a way to potentially make some quick bucks, there will be someone out there trying to do so.
The stock market possibly offers one of the best grounds for such rigging or pre-knowledge of announcements. Thousands of companies with many in each who are in potentially priviledged positions. Yes insider trading is illegal, but can we seriously expect that it is not widely practiced with so much potential money in it?
There are tens of thousands employed in the financial sector, billions of pounds worth of resources to hand, as an individual you're potentially at the bottom of the stack competing against the big-guns who in turn all compete against each other in their attempts to get a bigger slice of the pie.
On that assumption, surely most if not all stocks are priced at a fair value according to all known and anticipated influencing events. If therefore a winner is selected, perhaps it is more a result of luck arising out of unknown future events than that of any particular analysis skill. We've all heard of how throwing darts at the financial pages can be as, if not more rewarding than that of professional stock picking, so why would any small investor spend hour upon hour analysing in trying to out-wit the big-money. The time and effort just wouldn't seem justifiable. Someone who spends perhaps 20 hours per week to possibly boost their funds performance by a couple of percentage points over the year on a $100,000 fund might achieve a $2000 benefit for 1000 hours of effort. $2/hour - no thanks, living life is alot more dear.
Having said that, I do believe that stock trading is addictive. You can get a buzz out of the process, more-so when you're on a winner. At times it can race even the hardest of hearts in an often dull restricted life without even having to leave a chair. For many it is a hobby, comparable to supporting your local football team, the joy of winning, the sorrow of loss, a talking point. Primary however should be to not let that hobby cost you too much. Yes enjoy it, but protect yourself from the potential financial downside risks so that your hobby doesn't become a financial strain that impacts upon the rest of your life.
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