Research Strategies
Capital Ingenuity can help you understand how to research investments.

Researching different investment alternatives can be a daunting task if an investor does not have a plan with which to approach their research. There is literally an infinite supply of information available, especially on the Internet, that an investor can use to make an investment decision. However, if in investor attempts to first review all information they can find on a particular investment before making a decision, they will often never make a decision. This is sometimes referred to in the investment industry as "paralysis by analysis."

Some investors will spend an exorbitant amount of time researching an investment alternative, make a decision to buy, and earn a profit. While this does not at face value seem like a problem, it is possible to spend so much time researching an investment that the profit was simply not worth the time involved. For example, say an investor spent 100 hours researching a particular stock. After making a decision to buy, the investor purchases $10,000 worth of the stock. Over the next year, the stock goes up 10% and the investor decides it's now time to sell the stock.

Over the previous year the investor made $1,000 on their investment before taxes. At the same time, let's assume the investor is self-employed and can make $20 per hour working for their business. In this particular circumstance, the investor would have been better off financially to have worked at their job for the 100 hours instead of spending so much time researching the stock. Had they have worked with their business instead, they would have made $2,000 before taxes, or $20 per hour multiplied by 100 hours, instead of $1,000. In this particular circumstance, it is reasonable to say that the investor actually losti> $1,000, before taxes are calculated, in what is known as opportunity cost, despite the fact that it at first looked like they made $1,000.

One of the many keys to successful investing is becoming comfortable working in an environment of incomplete information. Capital Ingenuity helps clients understand different research strategies, how to make their research more efficient, and how to focus their time so they can be comfortable with their decisions.