| Are there simple ways for a ‘less sophisticated’ individual investor to make an informed investment decision? Despite what many may think, the answer is a resounding yes! An improved disclosure-based market environment post-Asian financial crisis coupled with the use of creative intelligence information gathering techniques has allowed individual investors to make rational and consistent assessments that distinguish them from the average investors.
Research is vital
There are two basic steps to research a potential investment.
First, read the financial statements of the company in the financial report and understand the numbers. Financial statement analysis, which is an important part in reading a company’s financial report, seems to be a lost art in Malaysia. Most individual investors are drawn to stories and do not pay enough attention to financial statement analysis.
Second, talk to the company’s management; get the management's perspective on the industry and current business trends.
To supplement these basic steps, investors should also practise creative intelligence gathering. This involves tapping on all the other sources of information that exist. The information can be found in newspapers, magazines, advertisements, etc. – which can be immensely valuable.
As it is not easy for individual investors to gain access to a company’s management, this article, using DiGi.Com Berhad (DiGi) as a case study, will address the other avenues of information gathering. It also explains to individual investors some simple ways to search for a successful stock:
- Financial Reports: Can it help individual investors in investment decision process?
- Creative intelligence gathering: Can individual investors make superior investment decision from traditional information sources (eg. newspapers)?
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