If you're new to investing but fancy having a go yourself, read on...
Across the various bulletin boards on the web, posters are continually encouraging fellow investors to "DYOR" -- do your own research. But what if you're completely new to this investing lark? How do you "DYOR" if that's you want to do, rather than relying on a managed fund or tracker?
Anyone just starting out can be forgiven for being utterly confused. There are seemingly countless websites and books on the subject -- and many posters on bulletin boards seem so well-informed. But what do you read and who can you trust?
The easy answer is that you can trust yourself initially, so "DYOR" is truly the best starting point. You may not be able to trust yourself to make the right decisions -- but you can trust yourself to try.
Read, read, read
Before doing anything, why not read a book or two on investing? Some of the best books ever written on investing are covered here.
Then go straight to the horse's mouth. Fool-UK Wire lists all announcements made to the London stock market. Simply type in the name or epic code (the "ticker") of the company concerned, take a deep breath, and start reading. But wait, once you're past the narrative, it can begin to sound like gobbledegook to the uninitiated. Even those who like to think they know what they're doing get confused. But it doesn't stop them being good investors. They read all they can and make their decisions.
The Motley Fool has a wealth of information to help you get to grips with company information. The "Fool School" covers a lot of the basic financial ratios, such as price-to-earnings & PEG, price-to-sales, gearing, yield and price-to-book.
The Analysing Reports and Accounts bulletin board is also very helpful in addressing specific questions you may have, whilst individual posts are often wonderfully detailed.
The company's latest annual report should also be a pre-requisite, whilst subscription-based websites such as hemscott, sharelockholmes, and companyrefs do some of the screening work for you and include information on things like brokers' forecasts, shareholders, historical data for profit and loss, cash-flow and lots more.
Would you buy it all if you could?
Remember to keep your feet on the ground. Always look at market capitalisation which is the number of shares multiplied by the share price -- in other words, the current valuation of the company as a whole. Do you think the current valuation is justified? A useful trick is to weigh up everything you can and put your own valuation on a company, before looking at or calculating the market cap.
Think like an entrepreneur. When assessing an investment opportunity, do a "Warren Buffett" and ask yourself if you would want to buy the business in its entirety if you could afford it.
Think like Peter Lynch and ask yourself if you really understand the business and have confidence in it. And perhaps most importantly, do you trust the management? What is their track record? Have they acted in a trustworthy manner in the past -- or have they delivered bad news at the last possible minute? Are their interests truly aligned with shareholders'? Attend the AGM if you're able to and see how you feel. Of course, these qualitative questions are difficult to answer fully, but having truly "DYOR", you will have a much better feel for things.
Then don't forget to post your thoughts on the most appropriate Motley Fool discussion board. You may get a little yin to your yang, but it's usually polite and the website has some very knowledgeable posters.
Good luck.!
Champion Shares, The Motley Fool's online share-tipping service is another great source of share ideas. For a limited period only, the annual subscription price has been slashed to £99. Sign up here for a free 30-day trial.
More: Help For Investing Beginners
