I’m new to investing and would really love to get some advice on where to get the most reliable and accurate data on US and Canadian equities. I’ve spent hours looking at different target prices provided by BMO Investor Line, Nesbitt Burns, MorningStar, Yahoo Finance, Nasdaq and a myriad of other sources. Is there one that rises above the rest in terms of quality?
It’s natural for new investors to look for information that can help nudge the odds in their favor. Let’s assume the extreme, that some financial news service had a crystal ball and predicted target prices with 100% accuracy. How would the markets react? Well, the market is a huge information processing machine. All news, information, and expectations are quickly priced in. If those predictions were indeed always correct, the word would quickly get out and those equities would trade their predicted target prices immediately. What would this mean for you? Well, your edge from the asymmetry in information (you initially had better information about those equities than the rest of the market) would be priced out. You would no longer have an advantage reading that financial news service.
And that’s really the bottom line. The odds that any service can provide an edge is extremely low. Of course, in reality, no one has a crystal ball. To predict how the market will behave, you really need to know tomorrow’s news. And markets really are that efficient. By the time you get actionable information from the financial news media, it’s already being priced in. Professionals rely on much more immediate news aggregation services (the financial news channels are just background noise). For all practical purposes, if you are looking for an edge in the short-term, by the time you hear anything it’s already outdated.
What about the longer term? Well, the conveyor belt of “market-gurus” and talking heads in the financial news media make predictions that on average turn out to be worse than a flip of a coin, and this includes the financial newsletters (see market guru grades or investment banking grades). Why would you follow their advice? Although that’s quite a nice gig, being an expert pundit on the financial news channels. You only need to be right less than half the time.
Now, maybe this is a bit disappointing to you, that stock picking and market timing are myths. On the contrary, it’s actually awesome news. It means that you don’t have to try and outwit or outguess the markets to be successful. And it means that you don’t have to pay a premium to someone for their supposed forecasting skill. Instead, if you are really looking to help improve your odds of investment success in the long term, stick to a globally diversified, risk-appropriate portfolio of low-cost index funds (those from Vanguard are a great start). You’ll be much more relaxed and rational about investing. And if you need advice, seek out a fiduciary investment advisor. They are required to only work in your best interest, so you won’t be sold any of that speculation (stock picking and market timing) nonsense. Good luck.
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