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How much research should you be doing on your stock investments?


One of the perennial questions faced by new traders is how much homework should you be doing on the investments you make? There is a tendency for many traders to pile into an investment before they have really done enough research on the stocks they are looking at.

However, many retail investors ARE working hard at managing their portfolios and setting aside regular time for research and strategy, according to new investor trend research carried out by GraniteShares, an Exchange Traded Fund manager.

The study found nearly half of investors (45%) say they have a strong focus on research with 13% claiming to research every part of an investment before committing their cash.

The commitment to managing their investments involves putting in the hours – around 28% set aside time every week to work on their portfolio with one in eight (12%) spending at least an hour a day.

Many professional investors like fund managers obviously spend a lot more time than this. Much will depend on the methodology you are using. The more systematic your approach, the more likely you will be narrowing down the investment universe to a relatively small number of choices.

Some fund managers will spend days or weeks looking at a company before they invest. Managing other people’s money demands this.

Not all retail investors are thorough

However, not all retail traders are so thorough. Around 17% say they trust their gut or choose shares to buy and sell at random. Another 25% say they do some research but rely on others for their trading strategies, while 13% say they mainly rely on recommendations and do little research.

The key source for research identified by the study is websites and recommendations from brokers or platforms. Around 23% rely on newspaper recommendations. Just one in eight base trading on social media recommendations, like Instagram and TikTok.

The study found 43% talk through their trading with partners while one in five discuss investments with friends. Only 3% discuss portfolios with investment clubs and just 5% use Reddit. This is interesting, as many successful professional investors tell me they like what they call a ‘collegiate approach’ to investing, where they can work with other people to identify the best investment ideas.

Will Rhind, Founder and CEO of GraniteShares, said: “Retail investors clearly take their money seriously, with many putting in the hours to get their decisions right. Even though some still rely on their gut, it’s heartening to know so many people take the time to discuss their choices with their trusted network.”

Even within the GraniteShares range of listed investment products, Rhind says he has seen evidence that investors are growing more confident. He said that the use of GraniteShares’ high-conviction ETPs has grown among more sophisticated investors, who are willing to accept higher risk for the potential of bigger rewards. This includes the use of leveraged ETPs which provide lower levels of leverage than Contracts for Difference.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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