Back-to-school goes well beyond September for Charles Rotblut.
As vice-president and journal editor for the American Association of Individual Investors, he believes investing is a continual learning process. For a fee of $29 a year, the non-profit organization hacks its way through a jungle of online financial sites and attempts to find the most relevant tools and information for its 160,000 do-it-yourself members.
"I think it's both empowering and overwhelming," he says. "There's certainly more information that's readily available to individual investors, but at the same time there's just been more quantity of information."
Finding what's relevant is easier said than done when you look at the recent explosion of self-help financial websites, blogs and Twitter commentary. Throw in the latest trend where brokers pitch mobile applications to manage portfolios online and it can be mind-boggling.
"You can have some websites that may not have the best appearance but have some really quality information and others that look really polished that don't provide good information," he says.
Where to start
His advice to investors is to start at the investment itself and go right to the source. If it's a stock, that means going to the company's website to find exactly what it does and read up on the latest earnings reports, conference-call transcripts, news releases and regulatory filings.
Certain information on publicly listed companies can be independently verified on exchange websites such as the Toronto Stock Exchange, the New York Stock Exchange or the Nasdaq Stock Market – along with other helpful information to compare it with other companies in a particular sector.
From there he recommends online services such Thomson Reuters or S&P Capital IQ, which publish hard data on companies such as earnings and revenue growth. "The stuff that's more data driven – where you can go through and look for specific traits – I think that's really helpful," he says.
Big brokerage houses pay big money for some of the top investment analysts. Many post their reports online complete with buy, sell or hold recommendations.
"I think they're helpful as a gut check," says Mr. Rotblut, who cautions investors that history shows that even analysts are sometimes wrong. "Try to read the actual report not to just look at the buy or sell rating. See what the analyst is looking at and see what they like and don't like."
He says do-it-yourself technical analysis websites can also act as a gut-check by confirming trends or matching price movements to specific news events.
For personalized service just about every financial institution has savings and retirement calculators available online. Mr. Rotblut says they can be valuable tools for keeping track of asset allocation targets and longer-term goals.
However, many assumptions are made such as rates of return, inflation and in some cases salary increases. "You have to realize these are estimates and they could actually end up being way off, but they're better than nothing."
Seeking professional help
Even do-it-yourselfers need help some time. Mr. Rotblut says depending on the individual's level of competence and ability to keep their emotions in check, it may be worth paying for investment advice. To keep fees low he suggests hiring an adviser on an hourly basis and meeting regularly – perhaps annually.
"For a good adviser the primary role is coming in and giving an objective viewpoint on what you're doing and making sure you're staying on track and not making bad decisions," he says.
He says only 30 per cent of AAII members use an adviser. "I don't think one is always necessary."
But ClientInsights president Dan Richards isn't so sure the average investor has what it takes to go it alone. He publishes a twice-weekly newsletter to 25,000 investment advisers across Canada and says there are four essential qualities a do-it-yourself investor should have: expertise, time, interest and discipline. "Of those four, the hardest by far is discipline."
Lately he has been focusing on the growing field of behavioral finance where studies attribute more and more market movements to emotion over rational decision making. "Good financial advisers are essentially emotional anchors. They keep the highs from being too high, they keep the lows from being too low," he says.
He says the longer-term role of a financial adviser is to help establish a long-term plan and keep investors on track. "When the market is hopping, and the client wants to go to 80- or 90- or 100-per-cent equities, advisers are the ones who blow the whistle and say let's go back to your plan, your asset allocation, and the top of your range at 60 per cent."
As markets shift and investors go about their everyday lives, he says, a good investment adviser should monitor changing portfolio weightings and work with the client to stick with the plan. "Rebalancing flies in the face of the instincts of most investors. In rebalancing you're actually lightening up on the stuff that's done well and adding to what's underperformed," he says.
He says all investors are different and that's why it's important to find the right adviser. "The big thing is finding someone who has the same mindset as you."
You get what you pay for. Mr. Richards cautions investors who need a lot of help to be prepared to pay higher fees.